Yongnam

Level of Subscription

Further to the Rights Announcements, Yongnam Holdings Limited wishes to announce that, as at the close of the Rights Issue on 28 June 2016, valid acceptances and excess applications for a total of 109,000,446 Rights Shares were received (inclusive of Rights Shares accepted by each of the Undertaking Shareholders pursuant to the Irrevocable Undertakings). This represents approximately 68.8% of the 158,367,548 Rights Shares available for subscription under the Rights Issue.

Accordingly, the Rights Issue is undersubscribed and the 49,367,102 Rights Shares (representing approximately 31.2% of the 158,367,548 Rights Shares) not taken up will be subscribed by CIMB Securities (Singapore) Pte. Ltd. (the "Underwriter") pursuant to the terms of the Management and Underwriting Agreement.

More details in http://infopub.sgx.com/FileOpen/YHL-Resu...eID=411255

http://infopub.sgx.com/FileOpen/_FORM_3_...eID=412085

Interesting turn of events. CIMB is now a top 20 shareholder.

A quick update, recently bought the rights at 0.001-0.005 (avg 0.026) and sold off Yongnam shares at 0.215. Wonder whether CIMB securities would do this abritage too.

Dear Value Buddies,

If you want to know the Values of the Buddies, you read this post all the way right from the beginning.
Read all 52 Posts, none of them had a positive comment whether they were vested or not.

I take my hat off to them.

If you were vested and took heed, you would have escape suffering loss.

According to my records, this company made good profits from 2007 to 2012 ($25M, $34M, $40M, $54M, $63M & $44M) respectively.
The company started going down 3 years ago.

What caused the problem?

Having said all the above, is the company currently under price?
Trading at the price of the Rights, $0.21. NAV $0.94, Historical high on 12th July 2007 was $2.067 adjusted price per share.

Let's see if anyone has some insight.

(09-07-2016, 06:06 PM)Retired@52 Wrote: Dear Value Buddies,

If you want to know the Values of the Buddies, you read this post all the way right from the beginning.
Read all 52 Posts, none of them had a positive comment whether they were vested or not.

I take my hat off to them.

If you were vested and took heed, you would have escape suffering loss.

According to my records, this company made good profits from 2007 to 2012 ($25M, $34M, $40M, $54M, $63M & $44M) respectively.
The company started going down 3 years ago.

What caused the problem?

Having said all the above, is the company currently under price?
Trading at the price of the Rights, $0.21. NAV $0.94, Historical high on 12th July 2007 was $2.067 adjusted price per share.

Let's see if anyone has some insight.

Hi Retired@52,

As at 31-Dec-2015 (Before the right issues)
Number of shares ~316.7 m
 
NAV = SGD 0.94 per share
 
Main bulk of its assets is in “steel beams & columns” for temporary work (strutting and support system) in construction – which has a net book value (cost less depreciation) of SGD 264.3 m  (~SGD 0.83 per share) accounted for under PPE.
 
Question is: what is the realizable market value of these “steel beams & columns” ?
_____________________________________________________________________________________________________________________

The market pricing seems about right, poor outlook and lack of potential catalysts. In fact I am of the opinion that the current rights issue is a sign that the company is forecasting some difficult times ahead.

(09-07-2016, 06:06 PM)Retired@52 Wrote: Dear Value Buddies,

If you want to know the Values of the Buddies, you read this post all the way right from the beginning.
Read all 52 Posts, none of them had a positive comment whether they were vested or not.

I take my hat off to them.

If you were vested and took heed, you would have escape suffering loss.

According to my records, this company made good profits from 2007 to 2012 ($25M, $34M, $40M, $54M, $63M & $44M) respectively.
The company started going down 3 years ago.

What caused the problem?

Having said all the above, is the company currently under price?
Trading at the price of the Rights, $0.21. NAV $0.94, Historical high on 12th July 2007 was $2.067 adjusted price per share.

Let's see if anyone has some insight.

For the full story you need to go back to the old wallstraits forum. Between years of 2007 to 2012 singapore saw a property bull run which means spillover into the construction industry.


Prior to 2007 and much earlier it was bad time for construction industry there was even a news article in the straits time that said construction was in a sunset industry this was long before announcement of genting and mbs casinos.


During that time I remember this stock ran into it's troubles, prior to 2007 was trading at 2 cents a share. It was deep in debt, in negative capital, had a david vs goliath litigation with bank who place it under judicial management and appointed a person to oversee it.


When a company placed under judicial management means "last chance" already. The last option is to appoint a manager to see if it can be rescued if cannot then the manager's job is to oversee 'proper disposal of assets in a orderly manner' euphemism for make sure the internal people dun plunder anything. 


And most times JM appointee is someone with strong financial background but will not risk their reputation, most cases I see they will just find a prospective knight for takeover or RTO. But for YN case expected RTO never happened this was different.


At that time around 2 cents a share I remember reading the sgx announcement the company was in such dire straits they couldn't even afford to pay a salary to the JM manager and issued him a huge load of shares. That guy really worked hard for his money also took a big personal risk, if for any reason what he did, didn't turn company around not only was he answerable and the shares wouldn't be worth a farthing he didn't get paid on top of it.


But it turned out well, he put in place very strict financial systems and cost controls hired in right people didn't allow cost overruns, the rumor was these controls didn't sit well with internal people, they had a rights issue that put the company into positive footing and being positive financially means they could tender for bigger projects w bigger margins like the BKK Suvarnabhumi Airport where they erected the massive columns to support the iconic dome like structures. They even surprised many when they won a high court case dismissal in their favor overhanging their fate.


After nicoll highway mishap government started to pump up spending and also announced "integrated resort" property boom took off at one point YN share price traded at a crazy high of 58 cents never quite closed at that level though but by then they already out of the woods. 


Then suddenly shortly after getting out of the woods the company announcement the JM director who turned around the company was stepping down and leaving - wild rumors of boardroom coup.


Almost 10 years on we hear company again in debt, rights issue seems like backsliding into "ol times".


What do you all think is wrong?    


I think from the projects they handle I would say they have very capable structural engineering team there's no doubt. 

Not sure how good their current business/financial team but from how to explain cost overruns if they had systems put in place by previous I would hazard a guess financial team now gets overruled somehow? 


not vested

IMO, its about how the current mgmt thinks. Their train of thinking seems to be more on volume than on margins (similar to Ezra and Swiber). While you may be an expert; when bidding for a project, it is important to have a margin of safety to cater for unexpected delays. However, for yongnam, it seems they cut their margin of safety way too thin, unlike TTJ. So while they indeed do have many projects even from govt, they do not make much (low margin/high volume approach)

The problem in construction industry is the liquidation damage (not sure if I got the term right), Yongnam encountered many cases where their projects ran over their contracted time limit, as a result paying damages. The most notable example was the construction of the national stadium

any vbs following up on this YN?
high volume/low margins biz model,

Any buddies tracking this co? The main concerns seem to be with management ability.

As the dominant player for infrastructure (scale really matters, especially for large projects like airports), there is the potential for Yongnam to ride the wave of upcoming infrastructure boom with all the Chinese investment and government spending.

https://www.bloomberg.com/news/articles/...cture-boom

Anyway it's a case of such severely depressed share price, there is little to lose. Management may not be the brightest around, but at least they are honestly trying to do their job. Moving factory to Malaysia as well to reduce cost. To me, the time is coming for this one, reversion to the mean happens more often than not.

Vested, core.

I am still tracking, the company is indeed in the dominant player in its industry.

However, the problem is still its margin approach. It bids for projects at a very low margin. If you compare 9MFy16 vs 9MFY16 margins, its gross profit margin has fallen from 9.5% to 8%. Revenue increased, gross profit fell and net profit fell even more.

No doubt Management is bright enough to reduce cost by moving production to Malaysia, however, if they keep bidding for projects with too low a margin of safety, it's back to square 1. While the share price does seem low, I don't think it is attractive as of yet. This is because its current equity consists of its PPE and steel materials. If the company is forced into liquidation, these materials will not fetch much in the market. (At best 25-30% of PPE value will be recovered, this is probably why it is selling at this current price).

As a value investor, I also want margin of safety when i bid for a stake in the company. Looking at Yongnam from a balance sheet perspective, 14 cents will be a good price to buy a stake. It will mean that I am valuing its PPE at 20% of its stated book value. Yongnam is selling at 25-30 x P/E, so its a bit difficult to measure by this metric. Its growth in earning is again down to mgmt ability to execute its projects smoothly without too much overrun/liquidation damages