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Avi-Tech Electronics is a provider for Burn-in, engineering and manufacturing services in the semi-conductor & electronics industry. Share price now around 92 cents cum dividend.
Why invest in Avi-Tech Electronics?
Business wise, Avi-tech has improved from loss making due to failed expansion into USA away from it’s core competency. Good try by management but not good enough. Divesting from that business has brought the bottom-line back into the green and a big fat wad of cash. Check out the CIMB coverage in Jan this year which has some detailed info on this stock : click here.
Market cap today sits at 31.5 million. For that, you get 25.72 million in net cash (much of it, 19.42m locked up in a fixed deposits) That’s 81.65% of market cap worth of cash! For another 6 million you get the property and equipment worth >12million and the rest of the business for free.
With so much cash and the company operations now bringing in more, dividends have been resumed. Historically these have been pretty good up until the company started making losses on their USA venture. If payout of 3 cents is maintained at the end of the year, yield would be a good 6.52%.
What I like is that the CEO has done lotsa buy-ins below the 8cent level since Nov 2014 to Jan 2015 before the half-yearly results, which look pretty good now that they are out. Now we know why. Management may have made a blunder in the US venture but at least they are not paying themselves excessively. DIrector renumeration stands at less than 600k for the 4 directors.
Given good outlook for a recovering semiconductor sector, even HDD makers like Cheung Woh are starting to make money, Avi-tech will likely remain on the mainboard for some time to come.
Thought I might just use material from my forum posts to do an article on this stock. Please note at time of writing, share price is SGD$0.18.
Why invest in Powermatic Data Systems?
In the latest half-yearly report, other than net cash of ~16.5m, the other major non-current assets are 19.5m worth of property(yielding 3.9%) and 8.6m investment securities(yielding 5%+). The current distributorship side business is running at breakeven. There is no debt on balance sheet.
Market cap stands at 31m now, so buying P.D could be seen as paying for an investment portfolio of property and shares yielding about 4%+ with a side of free cash. Plenty of margin of safety.
Dividend yield (now 5.5%) has historical stability and though arguably not completely sustainable if we extrapolate the earnings from first half, there is still plenty of cash to distribute over next few years, until either distribution business picks up, or management redeploys the cash during a market downturn buying more securities for more dividend income. There is no need for a cut in dividend as the company has good yielding property and securities as mentioned above contributing to the bulk of the payout.
Most importantly, for such a small cap, is that property asset + the cash of 50% per share provides reassurance that come another financial crisis, it won’t face danger of going kaput, unlike other over-leveraged companies
In the end its just a matter of waiting, for OPMI who wanna invest, for either a rebound in business(pretty unlikely) or a realization of asset value by some sales or further investment using available cash pile.
P.D may not be in the property business as management claims but it definitely is looking more and more like an investment holding company now.
Noticed this stock when it was trading at $0.10 levels. Now shot up to $0.123 high after 2Q report.
Balance sheet is rock solid with possible turnaround this year with 2 successful and profitable quarters, after improving their automotive side business in China. Yes China, but luckily this is a Singaporean company and not S-Chip.
More importantly, who owns this company then?
TOP 20 SHAREHOLDERS (Extracted from AR2013)
No. Name of Shareholder No. of Shares %**
1 Keytech Investment Pte Ltd 308,392,000 43.69
2 HSBC (Singapore) Nominees Pte Ltd 42,713,000 6.05
3 Chuang Tze Dey (Zhuang Zidi) 34,037,000 4.82
4 Chuang Wen Fu 27,714,000 3.93
5 Chuang Tze Mon (Zhuang Zimeng) 19,916,000 2.82
6 UOB Kay Hian Pte Ltd 16,805,000 2.38
7 Citibank Nominees Singapore Pte Ltd 13,877,000 1.97
8 OCBC Securities Private Ltd 13,756,700 1.95
9 DBS Nominees Pte Ltd 13,048,000 1.85
10 Wang Jian 10,165,000 1.44
11 Heng Ngee Boon 7,419,000 1.05
12 Ee Hock Leong Lawrence 7,295,000 1.03
13 Gu Chenghua 7,229,000 1.02
14 Chen Zhengmao 7,133,000 1.01
15 Koh Ser Kiong 5,000,000 0.71
16 Xu Jianxin 3,939,000 0.56
17 Quah Wee Hua 3,110,000 0.44
18 Rin Kei Mei 2,652,000 0.38
19 Cai WeiDong 2,650,000 0.38
20 Ong Poh Seng or Tan Swee Chin 2,640,000 0.37
TOTAL 549,490,700 77.87
After some digging, it seems Keytech Investment Pte Ltd is set up in Singapore and owned by 30+ people including the current Board of Directors with a good portion consisting the Chuang family. So management and ownership not too bad, most of BOD also having ~20+ years of experience in their respective fields with half from PRC and half from Singapore.
Memtech was listed on mainboard in July 2004 which makes it a decade old on SGX and has historically been an ok company which has been friendly to minorities in terms of dishing out dividends from earnings. Dividend yield was 6% when share price was stuck at 10cents past few months.
Fundamental snapshot @ $0.123 price :
NAV $0.22
Net cash 45.41%
Div Yield 4.88%
So far management OK, dividends OK, lots of cash OK, discount to NAV OK.
Dun care much for earnings but more concerned about business sector. For Memtech, looks like expansion into automotive segment was a smart move. China will be needing and producing lots of cars in the future even though short term wise, automotive sector there might be sluggish. So business sector outlook OK.
With five OK’s, let’s see how high or low this one runs 😀
Update April : taken some profit on this stock.
To share my simple stock analysis, portfolio and opinions on Singapore stocks and the greater world. Updates will be roughly once a month or fortnight depending on my mood and schedule.
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