Fibon ... Feb12

TA Securities Research

Results Preview
Fibon will be releasing its 2Q12 result by tomorrow. We expect net profit to be in the range of approximately
RM1.1mn to RM1.5mn. We believe this could be due to increase in contribution from the European region
particularly Ireland. Moving forward, we expect this trend to continue.

Stable Raw Material Price
The management guided that price of its main raw materials (Resin and fibre glass) is expected to be stable
on the back of a steady crude oil price. This is in line with our view on oil price which could hover within a similar range compared to last year (USD95-100/barrel). As such, we do not anticipate any margin compression resulting from higher material cost. We remain confident that the company would be able to maintain its PBT margin at approximately 40%.

Europe…The Next Thrust
The management is currently focusing to secure new customers from the European region. The negative
economic outlook of Europe is a cause for concern. That said, management stressed that most of its customers only use Europe as the main procurement point for raw materials, repackage and export the final products to other parts of the world. In fact, they indicate that the group actually unable to cope with the demand from the continent. There is an on-going collaboration in R&D exercise with the European customers that requires its existing plant to undergo some upgrading of machinery.

This could lead to improvement in quality as well as efficiency. Domestically, our check with the management indicate that negotiation with Tenaga Nasional Bhd is still ongoing. It may take some time before the deals could be concluded. Conclusion of a deal would have positive impact on our earnings forecasts. We have yet to impute any contribution from this project.

Upgrade to Buy
We maintain our earnings estimate. However, we adjusted lower target price to a more realistic
RM0.55, based on CY12 PER of 9x (10x previously). The share price has declined as much as 30% since
our Initiation report on the company. We think the sharp correction is much to do with the uncertain
economic outlook and poor 1QFY12 result. We now think that risk factors have been priced-in and
valuations have fallen to a much more attractive level (CY12 PER of 8.8x). Moreover, we see potential for
upside revision in earnings if the group delivers on the business opportunities in Europe. Hence, we
upgrade Fibon to a Buy from Hold previously. Key risk factors to our view include 1) increase in raw
material prices (e.g. resins and fibre glass 2) deceleration in global economy and 3) delay in product delivery to customers.