Foreland Fabrictech

[dydx]

By the look of this morning's active buying of this counter, it does appear that a strong re-rating of the share price is in the making - ahead of the coming FY10 full-year results announcement expected by end-Feb11 - for this well-established PRC-based specialist producer of high-end functional synthetic-fibre fabrics.

More info on Foreland Fabrictech.....
http://www.fulianknitting.com/intro.htm [corporate website]
http://info.sgx.com/webcoranncatth.nsf/V...1000FFDFA/$file/2010Q3_Results_Final.pdf?openelement [Q3-FY10 results announcement]
http://info.sgx.com/webcoranncatth.nsf/V...C00031F1D/$file/Foreland_3Q10PPT.pdf?openelement [Q3-FY10 presentation materials]
http://info.sgx.com/listprosp.nsf/07aed3...e001f463e/$FILE/Foreland2009AR.pdf [FY09 AR]

[iisterry]

If I'm not mistaken, their capacity expansion should be implemented/ready soon.

I recall that it was reported to be delayed again during the previous Results.

Not vested.

[dydx]

Foreland has hit $0.135 - up $0.025, or 22.7%, from the morning opening at $0.11 - after lunch break today (17Jan11).

It seems this is another case of a value investor's dream coming true early!

How far will Foreland's share price climb to? I suppose it will depend on and be guided by its fair intrinsic value, which by rational thinking should be higher than its NAV/share, since Foreland is a well-established business in recovery.

[ichiran]

Foreland just hit $0.15 - up 36% from opening price today!

This surge is not surprising, given that Foreland is a 2 decade old company with strong business sense and established approach. Many of its customers are strong brands in China itself, such as Li Ning, Anta, etc. ASP has also recovered from the dark days and utilisation rate surpassing 90% in 4Q10 and 1Q11.

Looks like investors are expecting a good set of earnings for last quarter and looking to gain by buying ahead of its Jan financial result!

(Vested)

[iisterry]

The textile sector is slowly returning to profitability hence the recent increase.

China Sky has rebounded from around 14c to 25c ever since the 2nd profitable Result Announcement.

China Fibretech has just issued a profit guidance stating a material rise in profit for the next Result Announcement. Share price up 2c to 10c today. Cash per share at around 14.5c.

Hongwei has Tembusu Fund as a shareholder. There is quite a lot of insider buy back recently.

There are quite a few textile counter on SGX. It is a high risk high gain sector.

[dydx]

It is a high risk high gain sector.

What's so high risk about an established fabric producer/processor, supplying/selling to established branded players (and their contract manufacturers) in a growing apparel industry and umbrella industry in PRC, which has a huge and growing domestic market and is a major exporter of apparels and umbrellas to the world?

I encourage you to do a quick review of Foreland's key customers: Anta 安踏, Edenbo 爱登堡, Li Ning 李宁, Peak 匹克, Sepwolves 七匹狼, Lilang 利郎, Fordoo 虎都 (above all branded apparel producers); and Hangzhou Paradise 天堂, Susino 梅花, Jin’ou 金欧, Yuzhongniao 雨中鸟, Angel 天使 (above all umbrella producers).

The last global financial crisis which started in Q3-08 had led to a very sharp contraction of export orders and demand for apparel/textile products from PRC which lasted till early-10. During this difficult period, there was a major supply-demand inbalance in the entire supply chain within PRC. For survival, producers which previously focussed on exports slashed selling prices in order to compete for domestic orders.

During this very tough period, Foreland had little choice but to accept reduced orders and sharply lower selling prices, in order to hold on to its customers. However, it is important to recognize that Foreland managed to avoid losses throughout the entire market/demand downturn. The company even managed to complete constructing its new factory, which should come in useful this year.

As usual, Mr Market had turned overly depressive and brought Foreland's share price to as low as $0.06. This had given rise to a great value investing opportunity.

Given enough time, the supply-demand inbalance has corrected itself, and since Q2-FY10, Foreland has been seeing increasing orders again, and selling prices have also recovered nicely. This very positive evolution is now supporting a re-rating of Foreland's share price upwards towards its justified fair value.

[iisterry]

...

Are you vested currently? I have been in and out of the S-Chip sector since 2009 with multi baggers and 60-70% losses in some.

I believe it would be prudent to caution the would-be investors that they are potentially looking at huge gains or huge losses.

High risk high gain sector as in the fact that it is an S-Chip (most would be aware of their reputation). A rising tide lifts all boats and I'm trying to highlight the fact that the entire textile sector has been seeing improving margins & profits.

If you did a search of all the companies listed on SGX, the textile companies are the ones that are trading at the largest discounts to NAV, lowest PE with significant cash per share. Mr Market prices them that way in order to create a margin of safety (that said, I'm vested with about a small car equivalent in S-Chips).

As for Foreland expansion plans, I'm pretty sure that the additional capacity is not yet in play as they reported a construction delay last quarter.

I opine that a value investor does not find joy in the mere fact that a share price has increased recently. Rather, he would find it much more meaningful if the vested company makes genuine significant headway in the business aspect.

[dydx]

Just to share a more independent view on Foreland from NRA Capital in an undated report first issued in Nov10.....
http://www.nracapital.com/sgxmas/Forelan...0final.pdf

Forumers interested in Foreland should call the analyst concerned, Jacky Lee (Tel. No: 6236 6886), for a chat.

[dydx]

Foreland has just issued a positive Business Update for Q4-FY10.....
http://info.sgx.com/webcoranncatth.nsf/V...C0033414D/$file/Foreland_Business_Update_20110118.pdf?openelement

It was mentioned in the document that both Revenue and PBT for Q4-FY10 will be higher than those recorded in Q4-FY09....
http://info.sgx.com/webcoranncatth.nsf/V...500300B8B/$file/FY2009resultannouncementvfinal.pdf?openelement

I thought that is more or less a given, bearing in mind the business had already experienced a strong recovery in Q3-FY10, and Q4-FY09 was a depressed quarter....
http://info.sgx.com/webcoranncatth.nsf/V...1000FFDFA/$file/2010Q3_Results_Final.pdf?openelement

Based on the strong momentum in demand and increase in selling prices, I wouldn't be surprised if Foreland's Revenue and PBT for Q4-FY10 turn out to be higher than those recorded in Q3-FY10. We shall see...

[AAA]

Foreland's share has dropped to 0.13 in line with market sentiment. If foreland is able to continue to earn another 0.58 singapore cents per share as in Q3FY10, the total earning for FY10 will be 0.78, giving it a PE of 16.7. However, Q1 and Q2FY10 were very bad quarters for Foreland; if the earning level of Q3FY10 maintains, for the next few quarters, net earning per year will be about 2.32 Singapore cents, giving it a forward PE of 5.6. Is it under-valued?

From market perspective, if price does not fall below 0.125, there is a chance that price will go up again mainly because some big boys are still accumulating.