Sunningdale Technology

(07-11-2015, 03:21 PM)(cy) Wrote: has anyone looked at this company recently? seems rather illiquid esp. after the share consolidation.

trading at really low valuations, PE of 5.5, PB of 0.5, EV/EBITDA of 4.9 with strong positive operating cash flows yearly and nice dividend payout record consistently over the last six years (gradual increase with improved financial performance).

with most of the manufacturers that have operational bases in Malaysia benefiting from the strong USD/MYR - thought this is one of the many laggards worth a look. post acquisition of First Engineering, they have incurred several one-off consolidation charges over the last two quarters and given that second half is stronger seasonally, they should report decent results this coming week.

Hi cy,

Similar to the Fisher thread, how do one interprete EV/EBITDA ratio?  Is a low or high figure better?  ST shows 4.9 while Fisher is 1.1.

Both as you said seems undervalued.

the lower the EV/EBITDA the 'cheaper' the company is but typically anything below 5 is considered value - at least for most PE funds.

Lizhong Wheel, Chosen and even previous manufacturers such as Armstrong and Adampak which were privatised all fall under this criteria. it is typically a more accurate reflection of manufacturing companies as they usually have certain level of debt.

Sunningdale is quite a much larger company compared to Fischer Tech in terms of their revenue and profitability levels but both seem rather undervalued compared to industry peers.

This counter fits into the criteria of a net-net stock (depending on the degree of discount rate one tend to use).

Just a couple of days ago, it was trading at $0.80. Using a discount factor of 25% on the inventories & debtors as well as 40% on the plant/equipment & other non-current assets, one can get a per share value of $0.83 after deducting all the liabilities.

A couple of positives on this counter:

- past 5 years avg $17 million of operational cash flow per year
- current cash backing of $0.61 per share
- constant insider purchase
- switched a portion of the manufacturing capability over to Brazil (a low cost country)
- cheaper raw materials due to lower oil px
- dividend payout do tend to increase slightly over the years
- first nearly full year of revenue & earnings contribution from first engineering after buying and merging the operations in
last quarter of Y2014
- financial results in first 9M already exceeded the full Y2014 results


On the flip side:
- revenue/earnings may drop if this global slowdown continue, which results in a drop of new orders from customers from
IT and consumer product sector.


(vested)

Another reasonable manufacturing company generating good cashflow. No wonder Mr Chairman has been busy buying. Boss, thank yourself for the divdends ok? But a bit kiam siap, 10cts would have been better...

A small clarification help needed. The way the report is written seems to imply Income tax expenses help increase the profit ? I find financial reporting very interesting !

- Revenue jumps 41.8% to S$674.5 million for FY2015
- profit of 42 million (will be 29 million if exclude currency gain)
- positive operating cash flow of S$67.1 million
- final dividend of 5 cents (increase of 25% YoY)

A fly under radar well managed manufacturing company will good amount revenue and profits generated from its assets over the years. I find it ridiculous that the current px only takes into account the cash and current assets.

Seems like Mr Market do not think that its hard assets are not worth anything meaningful.
What a pity!

(29-02-2016, 10:29 AM)level13 Wrote: A fly under radar well managed manufacturing company will good amount revenue and profits generated from its assets over the years. I find it ridiculous that the current px only takes into account the cash and current assets.

Seems like Mr Market do not think that its hard assets are not worth anything meaningful.
What a pity!

Erm Boss....

Not so long ago, making around $10-15m PAT was the norm for Sunningdale Tech. That kind of profit with capital of close to 300m capital is not really clever. Another thing is that the break-up value for plant and machinery of manufacturing companies => 不怎么样, not that great.

CF san

Incidentally, Sunningdale Tech was formed after Sunningdale Precision and Tech Group merged. That's why it is Sunningdale Tech and NOT Sunningdale Technology.

(24-02-2016, 12:10 AM)level13 Wrote: This counter fits into the criteria of a net-net stock (depending on the degree of discount rate one tend to use).

Just a couple of days ago, it was trading at $0.80. Using a discount factor of 25% on the inventories & debtors as well as 40% on the plant/equipment & other non-current assets, one can get a per share value of $0.83 after deducting all the liabilities.

A couple of positives on this counter:

- past 5 years avg $17 million of operational cash flow per year
- current cash backing of $0.61 per share
- constant insider purchase
- switched a portion of the manufacturing capability over to Brazil (a low cost country)
- cheaper raw materials due to lower oil px
- dividend payout do tend to increase slightly over the years
- first nearly full year of revenue & earnings contribution from first engineering after buying and merging the operations in
last quarter of Y2014
- financial results in first 9M already exceeded the full Y2014 results


On the flip side:
- revenue/earnings may drop if this global slowdown continue, which results in a drop of new orders from customers from
IT and consumer product sector.


(vested)

I would strictly use only cash / receivables and inventories (CURRENT ASSETS) minus the liabilities for net net calculation. As such sunningdale is not NET NET.
To be more conservative, for liquidation value a 50% discount to inventory and 25% discount to receivables should be used.
There is no cash backing as company has debts which are more than their cash & cash eq.

Of course u can feel free to use any discount to fit your calculations and even include non current assets to arrive at your final valuation.

Just sayin'

Things I don't like about Sunningdale :
1) High debt load of 120m which puts them in a slight net debt position despite high cash level 114.8m. yes debt is being paid down compared to last year but what's all that cash sitting around doing? which leads one to speculate if the other question is if the cash is really still there?? Note market cap is only ~177m at today price and sunningdale is not a property developer.

2) Measly dividend payout historically. Shows straight up management is OPMI unfriendly. Current inceased div is only 21% payout. Combined with insider purchases it only points to management try to increase their stake whilst keeping all the profits and goodies for themselves and giving out just enough to satisfy shareholders.

-nv-

(29-02-2016, 01:16 PM)HitandRun Wrote:

(29-02-2016, 10:29 AM)level13 Wrote: A fly under radar well managed manufacturing company will good amount revenue and profits generated from its assets over the years. I find it ridiculous that the current px only takes into account the cash and current assets.

Seems like Mr Market do not think that its hard assets are not worth anything meaningful.
What a pity!

Erm Boss....

Not so long ago, making around $10-15m PAT was the norm for Sunningdale Tech. That kind of profit with capital of close to 300m capital is not really clever. Another thing is that the break-up value for plant and machinery of manufacturing companies => 不怎么样, not that great.

Yes. This is the usual sign of a plastic component manufacturing company. High capital needed for equipment but low margin as there are many similar companies fighting for the same pie.

But what i like is that the shareholder friendly management is running the company very well under challenging conditions.
How many plastic companies can one name which has consistent positive operating cash flow for the past 5 years?
How many plastic companies tend to consistently declare dividends and also increase it over time?

Am also aware that the break up value for their assets will not be worth the amount carried on their books.
But the market seems to discount the above (assets & cash flow generation ability) completely. This is what i cannot fathom.