TTJ Holdings

I am attracted by the strong cash flow and low debt of the business.
But I am concerned about how it is valued over the past years.

Average PE for the last 8 years is about 5.
Average yield for the last 8 years is about 3.2%

Taking out the dorm business, average EPS for the last 4 years is about 3c. (My own rough calculation)
That gives us a PE of 9.67 at today's price of 0.29.
Historical payout ratio has been about 20%, which gives DPS of 0.6c.
That gives yield of 2%, if payout ratio is not raised. (Anyone knows the reason for the low payout ratio?)

I think PE is 9.67 is reasonable, but unless this company is re-rated with a higher multiple, I fear downwards adjustment of share price when earnings and DPS goes down after dorm business end.

On the other hand, P/B now is about 0.9, which compares favorably with historical average of about 1.

TTJ was listed in Apr 2010, slightly less than 6 years ago. No formal dividend policy was declared, but 20% was the optimum ratio, in the mind of the board. The board view was logical, with a high working capital needs of the steel biz, and the company plans after IPO.

Few of the plans were
- M&A for expansion, to tap into new market, customer and economic of scale
- Steel biz expansion into Malaysia and Middle East
- Expansion of fabrication facilities in Malaysia and Middle East.

The plan needed fund, and thus 22 million was raised in the IPO. Fast forward to 2016, only one oversea fabrication facility was established in Johor, Malaysia. More than 90% of business still from Singapore. Obviously, no major M&A was done during this period. It sounds disappointing, right?

Wait a minute, during this period (FY2011-2015), the company had generated $107 million in operating cash flow, and had spent only slightly more than $8 million in capex. The company had paid more than $14 million of dividends to its shareholders, excluding the most recent $28 million dividend. The cash reserve had grown from less than 38 million in FY2011 (including the $22 million raised from IPO) to more than $84 million by the end of FY2015, before the $28 million dividend payout. It sounds a great job done for its shareholders, for a company with market cap of about $100 million, right?

Based on the chairman statements in annual reports, the company has kept the cash, for its plans, either the initial oversea expansion plans, or the dorm biz expansion opportunities. Will the board continue to distribute part of the cash, after it is either too large, or no near future funding needs? I don’t know, but I wish so as a shareholder. The wish is becoming more real, after the recent 8 cents per share dividend, isn't it?

All comments are welcomed

(vested)

The recent big dividend looks more like a capital reduction made to look like nice fat div to placate and tease opmi.

Ttj has not been too opmi friendly with low payout in the past few boom years. A bit like ap oil, keep the cash in the company.

Growth is limited and probably boom years over with construction works in sg down. Ttj hasnt announce new contract for a while. Shrinking order book? Expansion next 5 years limited with poor global ecnomic outlook management may not want to expand either.

So does look like value trap. Also share price is riding all time highs so potential for big drop is very high in near term.

Possibly will be privatised at some stage as well

sent from my Galaxy Tab S

(10-03-2016, 11:39 AM)CityFarmer Wrote:

(09-03-2016, 12:45 PM)chew Wrote: Hi CityFarmer

Any thoughts on the ending of the dorm lease in Jan 2017? for FY 2015, it looks like it contributed over 60% of the profit before tax of continuing operations based on the annual report.

Hi chew,

I have started to value TTJ, by SOTP method after the last AGM. The dorm segment is valued by remaining cash flow. Well, I might be wrong.

I have done the review based on the last report. Let me share a view.

The 4-years "recurring" EBITDA of steel biz, is about $12 million. The current market cap is about $101 million with 29 cents per share, with zero debt, and cash reserve of $60 million (after the recent distribution of 8 cents per share as dividend). Based on a back-of-envelop calculation, the current EV/EBITDA, with ONLY the steel biz, is 3-4. It is a very low valuation given by Mr. Market. The ratio is even lower, after factoring the future cash flow of the dorm biz in the next 1-2 year.

I reckon, it is either Mr. Market wrongly valuing the company, or there are more than just the winding-down of dorm biz, that worrying the investors. Few possibilities, are, IMO
- the stagnant steel biz in Singapore, with no visibility of growth overseas
- the likelihood of value-trap with the cash hoarded.

Both aren't my worries. I have taken the company as cash cow, and the cow has been milking with good cash return, both in good and bad times. Value-trap? I am OK, as long as the management is trust-able, and the cash is growing over time.

What is your view?

(vested)

Hi CityFarmer

Many thanks for your views. Here's briefly how I see it.

1) I like management - has been tried and tested and have executed well
2) With the drop-off of the dorm business, I have conservatively factored in reduced earnings post 2017. Still relatively sanguine about rest of business, though I will look very closely at how they can make up for this lost earnings stream.
3) In my view, still relatively undervalued, but buffer not attractive as others yet and outlook not so clear.
4) Willing to go with lower buffer due to its track record. Consider it very attractive at 22, will buy some if it gets to around 25

Mr Teo makes his move:

http://infopub.sgx.com/FileOpen/_eFORM1V...eID=393594

130,000,000 ordinary shares

Transfer of shares by Mr Teo Hock Chwee from his securities account with a sub-depository agent, CIMB Bank
Berhad, to his direct CDP account.

What do you read of this?

Waiting to see if history repeats itself lor.

This was what happened not too long ago:

2015-09-23 ~ FY15 results, 8 cents dividend announced
2015-04-28 ~ Mr Teo buys 400 lots @ 34 cents, using direct CDP
2015-03-11 ~ 1H15 results
2014-11-14 ~ Mr Teo shifts 17mil shares from CIMB to direct CDP

(11-03-2016, 11:53 PM)smallcaps Wrote: Waiting to see if history repeats itself lor.

This was what happened not too long ago:

2015-09-23 ~ FY15 results, 8 cents dividend announced
2015-04-28 ~ Mr Teo buys 400 lots @ 34 cents, using direct CDP
2015-03-11 ~ 1H15 results
2014-11-14 ~ Mr Teo shifts 17mil shares from CIMB to direct CDP

Why is there a need to tranfer shares from nominee account to CDP account to receive dividend ?

After the CDP credited the dividend to the nominee bank, isn't the nominee bank going to credit the dividend received into the
respective nominee accounts?

Dun think its to receive dividend. Transfer to nominee account assumed its to borrow money. No need to borrow already then shift back to own CDP.

What's interesting is how come Mr Teo is not transferring all the shares out from CIMB after receiving the 8 cents dividend. Still got 50 mil shares not transferred out...

means till got 50m shares value owned to bank after buy-out Tat-Hong family shares,

hope to have more dividends payout soon!