Dutech Holdings

IIRC from my previous research on dutech, visiting their old website, DTMT already has operation and production factory in both germany  and china. It is unlikely that there could be much cost savings for DUTECH.. The failure of this german business in the first place is unlikely due to cost overrun as germans are pretty efficient. More likely it was due to poor sales as European economy is pretty bad overall and they may also have been outcompeted by other larger companies doing the same thing. 

A pertinent question to be asked is why they would wanna sell to DUTECH China based company?? I am sure there are plenty of such firms in Germany and Europe and if DTMT had some competitive techonology or patents and selling so cheap, pretty sure some other firm would have acquired it.

Also to note, I think just last year it was still making losses even after FORMAT supposedly was turned around.

And reading my post last year, given it is in net cash position, has the DEBT level gone up much?

This is some article I found written in Jan this year:
Dutech is an S-chip. Its 4.9x TTM P/E is at a 65% discount to its peer and downstream players averaging at 14.4x. Group CFO resigned in Dec 15, after six years’ service at Dutech, to pursue other interests and opportunities (company disclosure). In Jan 16, group CEO Dr Liu Jiayan sold 650k shares that were directly registered under his name via market transactions, with an average trading price of S$0.265. Dr Liu remains a controlling shareholder of Dutech, with a 43% stake held through his private firm.

http://singaporestockmarketnews.com/2016...ty-expert/

LOl why would Dr. Liu sell such small amount when he knows the company is doing well and giving out good dividend soon? The dividends should put enough $$ for him to use if he needed some spare cash. Especially when its just before the share price boom to 38c now? I wonder who is the fellow who benefit and the real motivation for this share sale.

Group CFO run road. Company can give any sort of reason. but its a suspicious point to consider.

And thinking about it, if their base business was really so profitable, why bother to acquire some GERMAN company?? Other than for the purpose of SEXY story telling?? And maybe allow for creative accounting to take place? I remember previously there was mention of their gaming machine business going to boom as well. Maybe they will aim to do an IPO for their subsidiary in the future, that would be a really sexy story ala sino grandness style.

looks like another speculative s-chip, good for the ride but if you dun get off in time then bye bye..

caveat emptor...


P.S CF see that you finally got convinced on the M&A story since we last discussed this stock in 2014 and vested at low prices, are you going to profit take soon or wait until it becomes like Penguin and drop back to 25cent level?


 

(04-05-2016, 07:03 PM)Greenrookie Wrote: I am very much interested in why Dutech succeed in turning around its acquisitions while techcomp failed. Both bought Euro companies at the cheap and hope to turn it round with cheap cost. 

Perhaps Dutech has. Stronger in house brand to "guarantee" demand and made "amends" with euro labour

CF, u know the reasons ?

I am still learning on the company. I don't know techcomp, thus not able to comment further. Will you able to give more hints on techcomp?

IMO, there are few key contributors to the success of the FORMAT acquisition. One is the product, both FORMAT and Dutech were having similar product pre-acquisition. Shifting production line from Europe to China, was relatively easier. Next, the product is having long lead time, thus the long supply chain from China, isn't an issue. After all, the idea is good, but the key is execution. Dutech's management has done well to turn-around, after two solid years of effort, and achieved good result in FY2015

If you refer to ARs, the gross margin of High Security segment, was about 30%, pre-acquisition. The gross margin dropped immediately post-acquisition to slightly more than 20% and was recovering over years. The gross margin has recovered to 32% in FY2015.

The DM story is more tricky since it is new to Dutech. The same model might work too, if the execution is done well.

(vested, and sharing and listening to ideas and opinions)

(04-05-2016, 07:54 PM)BlueKelah Wrote: P.S CF see that you finally got convinced on the M&A story since we last discussed this stock in 2014 and vested at low prices, are you going to profit take soon or wait until it becomes like Penguin and drop back to 25cent level?

Well, it is a growth stock to me, thus will hold long-term, as long as fundamental remains intact.

Europe is suitable for high value-added jobs, with its high cost-based. Production-level jobs isn't suitable. Dutech has leveraged on the weakness, and gains from it. I doubt it is due to lower demand. Dutech's High Security segment biz, has grown more than 2x in FY2015, after the FORMAT acquisition in FY2011.

(vested)

(04-05-2016, 07:03 PM)Greenrookie Wrote: I am very much interested in why Dutech succeed in turning around its acquisitions while techcomp failed. Both bought Euro companies at the cheap and hope to turn it round with cheap cost. 

Perhaps Dutech has. Stronger in house brand to "guarantee" demand and made "amends" with euro labour

CF, u know the reasons ?

CF, I'm on the same page as you on this one. Bought in at a much lower price, it's been rallying.
Only regret (As always with good companies), is that I haven't bought enough.

I think it's hard for outsiders to know why a company is successful in integration while another isn't. Too many factors at play here.
The CEO Johnny Liu though, is IMO a respectable guy. Capable and hardworking, while maintaining a low profile.
Look at this remuneration. It's very very reasonable for someone running such a sizable public listed company, esp since he has performed well
I hope he doesn't read this, but as a shareholder, I'll be happy if he increases his own remuneration

(04-05-2016, 09:54 PM)CityFarmer Wrote:

(04-05-2016, 07:54 PM)BlueKelah Wrote: P.S CF see that you finally got convinced on the M&A story since we last discussed this stock in 2014 and vested at low prices, are you going to profit take soon or wait until it becomes like Penguin and drop back to 25cent level?

Well, it is a growth stock to me, thus will hold long-term, as long as fundamental remains intact.

Europe is suitable for high value-added jobs, with its high cost-based. Production-level jobs isn't suitable. Dutech is leveraged on the weakness, and gains from it. I doubt it is due to lower demand. Dutech's High Security segment biz, has grown more than 2x in FY2015, after the FORMAT acquisition in FY2011.

(vested)

It does look like Dutech is on the path to profits now. Just hope the current steel price rebound is not sustainable, otherwise that could impact earnings again. Also many businesses are losing the cost benefit of Chinese production as wages rise there. 

Whether this becomes a stellar growth stock like Riverstone or just speculative stock remains to be seen.

(05-05-2016, 07:45 AM)BlueKelah Wrote:

(04-05-2016, 09:54 PM)CityFarmer Wrote:

(04-05-2016, 07:54 PM)BlueKelah Wrote: P.S CF see that you finally got convinced on the M&A story since we last discussed this stock in 2014 and vested at low prices, are you going to profit take soon or wait until it becomes like Penguin and drop back to 25cent level?

Well, it is a growth stock to me, thus will hold long-term, as long as fundamental remains intact.

Europe is suitable for high value-added jobs, with its high cost-based. Production-level jobs isn't suitable. Dutech is leveraged on the weakness, and gains from it. I doubt it is due to lower demand. Dutech's High Security segment biz, has grown more than 2x in FY2015, after the FORMAT acquisition in FY2011.

(vested)

It does look like Dutech is on the path to profits now. Just hope the current steel price rebound is not sustainable, otherwise that could impact earnings again. Also many businesses are losing the cost benefit of Chinese production as wages rise there. 

Whether this becomes a stellar growth stock like Riverstone or just speculative stock remains to be seen.

Dutech has always been profitable.
Earnings in the past 6 years (in RMB cents):
2010: 18.11
2011: 10.16
2012: 11.29
2013: 28.15
2014: 40.02
2015: 33.1
Although the drop in steel prices definitely helped Dutech, I don't think it's the main reason for the growth. The successful integration and expansion into other related industries is the key and management has executed thus far.



https://thumbtackinvestor.wordpress.com/

(05-05-2016, 07:45 AM)BlueKelah Wrote: Whether this becomes a stellar growth stock like Riverstone or just speculative stock remains to be seen.

My interpretation of "speculative" might be diff from yours. I will less rely on price movement, but more on fundamental changes.

E.g. (1) Kingsmen, bought at about $1 per share previously, wasn't speculative, although price dropped to almost 60 cents per share weekly ago.

E.g. (2) Riverstone, bought at about 60 cents per share (post-bonus) previously, was speculative in my opinion, although price was more than $1 days ago.

(sharing a view, and the interpretation is based on P/FCF with reasonable MOS)

I think that the tie-up with Droege Group has added value for Dutech with a much greater presence in Europe. Revenue from Europe has increased from RMB 77m in 2010 to RMB 485m in 2015. In the same time frame, revenue from Europe has increased from 21% to 41% of the total revenue for Dutech on a geographical basis. Currently, Droege Group holds 2 out of the 7 board seats that Dutech has. 

In addition, since the merger with Format (which was a subsidiary under Droege Group), they have mainly acquired European companies (i.e. DTMT and Krauth). Given Droege Group's status as a family-owned investment company with over 25 years of corporate value-enhancing experience in Europe, it seems plausible that Droege Group's connections have given access for Dutech to acquire these companies (on the cheap).

This ties in with the value enhancement strategies which Droege Group has identified for Dutech in the link below, i.e. targeted acquisitions and increasing depth of value-addition and product range with the diversification of product range to include higher value-adding intelligent terminals. 

http://www.droege-group.com/en/what-we-d...io/dutech/

Thus far, revenue has increased across the board in the major markets which Dutech is currently operating in. It will be interesting to see whether the synergies with the subsequent acquistions will translate to future growth in earnings for Dutech (similar to the case with Format) or that they will result in diworsification with higher recurring costs and corresponding fall in profit. Of course, as a shareholder, I hope more for the former.

(08-05-2016, 08:26 PM)btws548 Wrote: I think that the tie-up with Droege Group has added value for Dutech with a much greater presence in Europe. Revenue from Europe has increased from RMB 77m in 2010 to RMB 485m in 2015. In the same time frame, revenue from Europe has increased from 21% to 41% of the total revenue for Dutech on a geographical basis. Currently, Droege Group holds 2 out of the 7 board seats that Dutech has. 

In addition, since the merger with Format (which was a subsidiary under Droege Group), they have mainly acquired European companies (i.e. DTMT and Krauth). Given Droege Group's status as a family-owned investment company with over 25 years of corporate value-enhancing experience in Europe, it seems plausible that Droege Group's connections have given access for Dutech to acquire these companies (on the cheap).

This ties in with the value enhancement strategies which Droege Group has identified for Dutech in the link below, i.e. targeted acquisitions and increasing depth of value-addition and product range with the diversification of product range to include higher value-adding intelligent terminals. 

http://www.droege-group.com/en/what-we-d...io/dutech/

Thus far, revenue has increased across the board in the major markets which Dutech is currently operating in. It will be interesting to see whether the synergies with the subsequent acquistions will translate to future growth in earnings for Dutech (similar to the case with Format) or that they will result in diworsification with higher recurring costs and corresponding fall in profit. Of course, as a shareholder, I hope more for the former.

Their expansion thus far is via acquisitions.
The main issue with acquisitions is integration, and here, Dutech is doing very well, turning over previously loss making entities and making them profitable.
Even with the recent very steep run up in share prices, I am not selling my stake as it is still undervalued IMO. It is still trading at just below book value.
The relatively poor valuations assigned for Dutech is probably because of it's "S-chip" status.
But thus far, management has shown they are not the typical S-chip


https://thumbtackinvestor.wordpress.com/

Dutech achieved a blended GPM of a high 28.6% in FY15 (vs. 24.4% in FY14) from its 2 product segments - High Security and Business Solutions - and this positive increasing trend could improve further as the group scales up in business volume and improves on its value-add and product technological content.

Indeed, Dutech is quite an unique manufacturing enterprise. More info.....
http://infopub.sgx.com/FileOpen/Dutech_A...eID=398129 [FY15 AR]

Group companies' websites.....
http://www.tristarinc.com
http://www.dtmt.de/en/home.html
https://format-tresorbau.de
http://formatsafe.com