PEC

(23-12-2015, 07:16 PM)BlueKelah Wrote: more share buyback at 39c today looks like they are just stocking up for ESOS since already no money to give dividend still got money to do share buyback.

What nonsense the management.

At this point, it makes more sense to use free cashflow to do share buyback then to payout to existing shareholders. The ROE on buying back shares at such a deep discount is immediately value accretive for shareholders

(18-03-2016, 08:56 AM)propertyinvestor Wrote:

(23-12-2015, 07:16 PM)BlueKelah Wrote: more share buyback at 39c today looks like they are just stocking up for ESOS since already no money to give dividend still got money to do share buyback.

What nonsense the management.

At this point, it makes more sense to use free cashflow to do share buyback then to payout to existing shareholders. The ROE on buying back shares at such a deep discount is immediately value accretive for shareholders

dun see it that way, it just a play on numbers a.k.a accounting trick. It will directly improve EPS and ROE but decreased the book value. It will indirectly decrease dividend yield via increased share price. So depending on how you "value it", may seem "value accretive" at the first glance.

It will increase price in the short term but unless OPMI has substantial holdings, share price may gain a bit but since its not in cash unlike div, OPMI cant really get the cashflow into his cash holdings and wait for a further drop in price to buy in, if that is the strategy, as there are associated selling costs which may be significant to OPMI.

Also as we all know, when there is substantial share buyback, the majority owner share will increased in % which will increase their voting power and ultimately enable them to GO and delist more easily. Hence for me share buy backs are an "unfriendly signal" from mgt. 

PEC doesn't payout much div in better years and now does share buybacks instead of maintaining their dividend. Conclusion is they are not that OPMI friendly though considered still more friendly than company like AP Oil.

You may want to rethink this gesture in this case. PEC written down book value is 80c. Buying back shares at 41c immediately adds a value of 39c to the company, improves EPS and ROE. Whats wrong about that? Currently, the cash per share already exceeds the market cap of the company. Management should be more aggressive with share buybacks

(18-03-2016, 12:39 PM)propertyinvestor Wrote: You may want to rethink this gesture in this case. PEC written down book value is 80c. Buying back shares at 41c immediately adds a value of 39c to the company, improves EPS and ROE. Whats wrong about that? Currently, the cash per share already exceeds the market cap of the company. Management should be more aggressive with share buybacks

there is an example here demonstrating the math behind how share buyback decreases book value and increases EPS and ROE in the link below.
http://www.investopedia.com/articles/fun...-value.asp

To put it simply, PEC book value may be 80c, around 40cents+ is in cash. Lets say company spends 40cents worth cash on buybacks. book value will be down to 40cents as the cash gone into the buybacks is gone. 

So now you have increased ROE/ROA/EPS due to less shares but book value is down to 40cents due to the cash asset gone. Improvement in financial ratios and possibly share price comes at the expense of book value. 

See how the share buy back does not add any value?   It's just a play on numbers.


There is nothing wrong with doing share buybacks, it is perfectly legal and common practice of many companies and it does make things look better on paper and usually provides a boost to share price in the short term. For short term holders its a great thing!! but for long term investors it will not create that much value.


However . Some pertinent questions we have to be aware is 

1) Can company value add by investing the cash to grow the company, eg. acquisitions/marketing/improving productivity? 
2) What will happen to all those treasury shares after buyback? are they gonna give out as ESOS and dilute your share?
3) Is this a reasonably low price that the buyback is occuring or is it just to shore up and protect the share price from sliding?
4) Is this done at the expense of maintaining a steady dividend?

(18-03-2016, 09:56 PM)BlueKelah Wrote:

(18-03-2016, 12:39 PM)propertyinvestor Wrote: You may want to rethink this gesture in this case. PEC written down book value is 80c. Buying back shares at 41c immediately adds a value of 39c to the company, improves EPS and ROE. Whats wrong about that? Currently, the cash per share already exceeds the market cap of the company. Management should be more aggressive with share buybacks

there is an example here demonstrating the math behind how share buyback decreases book value and increases EPS and ROE in the link below.
http://www.investopedia.com/articles/fun...-value.asp

To put it simply, PEC book value may be 80c, around 40cents+ is in cash. Lets say company spends 40cents worth cash on buybacks. book value will be down to 40cents as the cash gone into the buybacks is gone. 

So now you have increased ROE/ROA/EPS due to less shares but book value is down to 40cents due to the cash asset gone. Improvement in financial ratios and possibly share price comes at the expense of book value. 

See how the share buy back does not add any value?   It's just a play on numbers.


There is nothing wrong with doing share buybacks, it is perfectly legal and common practice of many companies and it does make things look better on paper and usually provides a boost to share price in the short term. For short term holders its a great thing!! but for long term investors it will not create that much value.


However . Some pertinent questions we have to be aware is 

1) Can company value add by investing the cash to grow the company, eg. acquisitions/marketing/improving productivity? 
2) What will happen to all those treasury shares after buyback? are they gonna give out as ESOS and dilute your share?
3) Is this a reasonably low price that the buyback is occuring or is it just to shore up and protect the share price from sliding?
4) Is this done at the expense of maintaining a steady dividend?

The example in the investopedia URL given is where share price (i.e. $200) is higher than Book Value ($150). In the event,  Share price (e.g. $100) is less than Book Value ($150). The post buyback Book value,  should be increased in this case $200.

XYZ Corporation: post-buyback 
Note: $50 billion of cash assets was spent to buy 500 million shares at $100 per share.

1. Total assets $250 billion - Total liabilities $150 billion 
   Book value = $100 billion
   
   
2. Book value $100 billion / Shares post-buyback 0.50 billion
   Book value per share = $200 per share
   

(18-03-2016, 09:56 PM)BlueKelah Wrote:

(18-03-2016, 12:39 PM)propertyinvestor Wrote: You may want to rethink this gesture in this case. PEC written down book value is 80c. Buying back shares at 41c immediately adds a value of 39c to the company, improves EPS and ROE. Whats wrong about that? Currently, the cash per share already exceeds the market cap of the company. Management should be more aggressive with share buybacks

there is an example here demonstrating the math behind how share buyback decreases book value and increases EPS and ROE in the link below.
http://www.investopedia.com/articles/fun...-value.asp

To put it simply, PEC book value may be 80c, around 40cents+ is in cash. Lets say company spends 40cents worth cash on buybacks. book value will be down to 40cents as the cash gone into the buybacks is gone. 

So now you have increased ROE/ROA/EPS due to less shares but book value is down to 40cents due to the cash asset gone. Improvement in financial ratios and possibly share price comes at the expense of book value. 

See how the share buy back does not add any value?   It's just a play on numbers.


There is nothing wrong with doing share buybacks, it is perfectly legal and common practice of many companies and it does make things look better on paper and usually provides a boost to share price in the short term. For short term holders its a great thing!! but for long term investors it will not create that much value.


However . Some pertinent questions we have to be aware is 

1) Can company value add by investing the cash to grow the company, eg. acquisitions/marketing/improving productivity? 
2) What will happen to all those treasury shares after buyback? are they gonna give out as ESOS and dilute your share?
3) Is this a reasonably low price that the buyback is occuring or is it just to shore up and protect the share price from sliding?
4) Is this done at the expense of maintaining a steady dividend?

When the company buys back the shares at 50% discount to book value, they are getting 2c of value for every 1c spent. This is beneficial for the other shareholders. That's why it's good for the company to do so only if they are generating free cashflow.

PEC named by OCBC as one of the companies with a likelihood for privatisation due to their solid cash balance

(12-04-2016, 09:52 AM)propertyinvestor Wrote: PEC named by OCBC as one of the companies with a likelihood for privatisation due to their solid cash balance

Privatisation is unlikely in the short term given the boss owns together with her son 56.76% and there are 5 other KOs in the top 20 shareholders for a total over 60%. Mgt is resorting to SBB to increase their stake at the moment and employee/director share awards. When boss actually starts buying herself then probably we are nearer to any sort of privatisation offer. THere is still 26% free float not in the top 20 shareholders hands, so still some distance for KOs to go before they GO.

The share price has been beaten down due to the loss last year for provision of bad debts for Jurong Aromatics which resulted in a loss.
Singapore OnG scene is bad for PEC, though good projects coming in from middle east.

Order book as at 
end june 2015 was S$400m
End Dec 2015 was S$239.7 million
No new contracts since then, though may have new one for more storage from Saudi soon if there is no oil freeze.

most investors are more interested in the order book and projected earnings in next few years which dun look rosy. So share price likely remain depressed.

though at current prices it does look like a whole heap of value and they are still making some money. Downside is limited due to trading below cash value now. But unless orderbook reverses trend it unlikely share price will move up much.

PEC reports 27% higher revenue of S$432.4m for 9MFY16

Work done on overseas projects continued to lift the sales of PEC Ltd. (PEC, and together with its subsidiaries and associated companies, the Group). The Group reported a 27% rise in revenue to S$432.4 million for the nine months ended 31 March 2016 (9M FY16) while net profit increased to S$13.7 million from S$1.1 million in the previous corresponding period, due mainly to the sale of properties and assets in the second quarter of the current financial year (2Q FY16).

As at 31 March 2016, the Group‟s orderbook stood at S$206.8 million, excluding maintenance contracts

A decrease in order book is worrying but that is tempered by the headline revenue growth, room for both glass half full and half empty views

(12-05-2016, 11:35 AM)Shrivathsa Wrote: PEC reports 27% higher revenue of S$432.4m for 9MFY16

Work done on overseas projects continued to lift the sales of PEC Ltd. (PEC, and together with its subsidiaries and associated companies, the Group). The Group reported a 27% rise in revenue to S$432.4 million for the nine months ended 31 March 2016 (9M FY16) while net profit increased to S$13.7 million from S$1.1 million in the previous corresponding period, due mainly to the sale of properties and assets in the second quarter of the current financial year (2Q FY16).

As at 31 March 2016, the Group‟s orderbook stood at S$206.8 million, excluding maintenance contracts

A decrease in order book is worrying but that is tempered by the headline revenue growth, room for both glass half full and half empty views

the company also seems to have a huge net cash hoard which is higher than the current share price?