MORNING CALL: 11/9/23

PublicInvest Research is cautious on Fiamma’s near-term outlook, though it remains positive on the group’s long-term prospects

Transcript

00:00 Household Goods Trading Outfit, Fiamma, recently paid RM109.65 million for an alienation land

00:08 approval to develop a plot of land in KL on behalf of its unit, Sinaran Uros Juta, which

00:14 is in the real estate business.

00:16 Public investor research maintaining its neutral call on the counter, with an unchanged target

00:21 price of RM1.

00:22 The stock last closed at 95 cent.

00:25 So the deal involved a 1.88 acre plot strategically located along Jalan Yap Kwan Seng, near its

00:31 existing 1.4 acre tract.

00:34 Based on its preliminary estimates, public investor says the market value of the land

00:39 should stand at RM183 million based on RM3,000 per square foot.

00:44 Now assuming it's financed 70% by external borrowings, public investor says the group's

00:50 gearing is estimated to increase from 0.16 times to 0.25 times.

00:56 Development of the land will undoubtedly contribute positively to the group's future earnings,

01:00 though the research house is making no adjustments to its estimates, pending further guidance

01:05 on the development by the management.

01:07 It says it is still cautious over Fiamma's near-term outlook, as domestic demand is expected

01:12 to remain soft, with consumer sentiment weakened by tighter monetary conditions and elevated

01:18 inflationary pressures.

01:20 Still it remains positive over the group's long-term prospects, underpinned by the growing

01:25 middle class and household income growth, which should lead to stronger consumer spending.

01:29 Let's take a look at what the street has to say.

01:32 According to Bloomberg data, the only other research house covering Fiamma is Afin Huang

01:37 Investment Bank, with a sell recommendation and target price of 57 cent.

01:42 So that's one buy and one sell, with an average target price of 78 cent.

01:46 The counter closed on Friday at 95 cent, so that's a potential downside of almost 18 percent.

01:52 Thanks for watching.