InnoTek

Innotek has released their results - doesn't look very good. Any comments?

(Not Vested)

I see following key differences:

InnoTek:
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1. Consistently paid $5 cents dividend for last 4 years eventhough EPS for three of four years is less than $5 cents. Mgmt is proud of it. Very likely it will maintain this trend unless company makes significant loss.
2. Narrowly focused on TV components, Automotive & recently entered in mobile and telecom equipment
3. as of today, trading at 0.45 x of NAV. If I consider only properties + cash - borrowing, stock is trading at 1.45x.
4. For last three quarters, company making loss and more likely it will make loss for FY2012.

Amtek:
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1. Company strives to pay 50% dividend payout ratio. So dividend would likely follow earning trend. This year dividend has been less than last year dividend.
2. Very diversified products and industries focused within precision engineering. Refer my post in "Amtek Engineering" track for detail. Hence very likely to withstand the specific industry shocks.
3. Trading at 1.7x of NAV. - less margin of safety as compare to InnoTek
4. Company is sustaining profit for last three years.

Leave it to your decision based on above fact. However mindful about major risk of InnoTek for delisting or loose the steam of dividend once it exhausts the cash if it makes loss for continuous three years or more.

This is my person opinion.

http://www.straitstimes.com/news/busines...r-20140718

'Unusual' trading in Innotek linked to possible takeover offer
Published on Jul 18, 2014 5:00 PM



By Melissa Tan

SINGAPORE - Unusual trading activity in the shares of mainboard-listed precision engineering firm Innotek could be linked to a possible takeover of the company.

Innotek told the Singapore Exchange on Friday that it has received a letter from one of its substantial shareholders, Gazelle Capital, in which Gazelle said it was "in discusssions regarding a transaction which may or may not result in an offer for the shares of the company".

Gazelle added in its letter that the "discussions remain very preliminary".

The exchange had sent a query to Innotek on Thursday asking about what it called "unusual volume movements" in Innotek shares that day.

Innotek replied to SGX later on Thursday to say it was unaware of any possible explanation for the activity.

In its update on Friday, Innotek said it got the letter from Gazelle after its reply to SGX on Thursday.

It added that other than Gazelle's discussions, it was "not aware of any other possible explanation" for the unusual trading activity.

Innotek shares were trading at at 40.5 cents, up by 3.5 cents, at around 4.30pm on Frida

On 18 July 2014, 14 August 2014 and 12 September 2014, the Board of Directors (“Board”) of InnoTek Limited (the “Company”) announced that the Company received a letter from Gazelle Capital Pte. Ltd., a substantial shareholder of the Company, informing the Company that they were in discussions regarding a transaction which may or may not result in an offer for the shares of the Company.

The Board wishes to announce that on 17 October 2014, Gazelle Capital Pte. Ltd. informed us that “following confidential discussions and after due deliberation, we have decided not to proceed with any transaction at this time.”

http://infopub.sgx.com/Apps?A=COW_CorpAn...uddies.com

At the last transacted price of 28.0 cents, it is trading at a Price/NAV of 0.43. The management is committed to pay out a 1.0 cent dividend - even for FY2012 when it incurs loss. It is likely to incur a loss again in this FY as the loss incurred for the last 9 months is $10.5m or 4.7 cents per share. Cash on hand is 34.3m while borrowing is $11.2m. Despite of the loss, operating cash flow is strong ($10.9m in the first 9 months), partly due to the sale of Sabana Reits (net proceed of $8.18m in the last 9 months). It still has $11.6m worth of financial asset held for investment, which is most probably the remaining Sabana Reit units it is holding. Innotek is expected to turn around in the last quarter of this FY but will still incure a loss this FY. It is worth to keep it in the watch list to see if it will turn in a profit in 4Q14. I do expect it to continue to pay out 1.0 cents of dividend.

Innotek seems to be getting back on the path to profits under Mr. Lou Yiliang who was appointed on 2 November 2015, as Executive Director of the Group and Chief Executive Office ("CEO") for Mansfield Manufacturing Company Limited ("Mansfield"). This stock was once a favorite for yield lovers having given out dividends of 5 cents every year (from 2008 to 2011) and then dividends of 1 cent for 2012 & 2013 before stopping them from 2014. The company had a large cash balance which allowed them to pay out these dividends inspite of being loss making since 2011. 

The pertinent numbers for 9M16:

Revenue: $159.352 mil
Net Profit: $6.812 mil (with NP in 3Q16 being $5.017 mil)
No. of shares: 223.835 mil (+ 22.821 mil being held as treasury shares. These were bought back at prices well above the current share price)
EPS: $0.0304 (for 9 months)
NAV: $0.529
Current Assets - Total liabilities: $54.381 mil
Cash on hand: $22.019 mil
Short term debt: Nil
Long term debt: $0.077 mil
Current market cap: $49.24 mil (At today's closing price of $0.22)

Innotek is practically a zero debt company. If they are able to keep up the performance moving forward this stock could provide decent returns for its shareholders both in terms of a restart of dividends as well as a turnaround in the share price as well.

Look forward to viewpoints from other Valuebuddies who may be tracking this company.

(15-11-2016, 10:01 PM)sgmystique Wrote: Innotek seems to be getting back on the path to profits under Mr. Lou Yiliang who was appointed on 2 November 2015, as Executive Director of the Group and Chief Executive Office ("CEO") for Mansfield Manufacturing Company Limited ("Mansfield"). This stock was once a favorite for yield lovers having given out dividends of 5 cents every year (from 2008 to 2011) and then dividends of 1 cent for 2012 & 2013 before stopping them from 2014. The company had a large cash balance which allowed them to pay out these dividends inspite of being loss making since 2011. 

The pertinent numbers for 9M16:

Revenue: $159.352 mil
Net Profit: $6.812 mil (with NP in 3Q16 being $5.017 mil)
No. of shares: 223.835 mil (+ 22.821 mil being held as treasury shares. These were bought back at prices well above the current share price)
EPS: $0.0304 (for 9 months)
NAV: $0.529
Current Assets - Total liabilities: $54.381 mil
Cash on hand: $22.019 mil
Short term debt: Nil
Long term debt: $0.077 mil
Current market cap: $49.24 mil (At today's closing price of $0.22)

Innotek is practically a zero debt company. If they are able to keep up the performance moving forward this stock could provide decent returns for its shareholders both in terms of a restart of dividends as well as a turnaround in the share price as well.

Look forward to viewpoints from other Valuebuddies who may be tracking this company.

had a quick look,
whilst valuation looks good, profit has had a big jump and  there are a few questions that need to be answered.

1) Revenue has been quite flat, this past year, it seems profit comes mainly from cost of sales being much lower than last year. What if metal price spike? I read that China is now consolidating 10 tangshan steel makers into one big company and curbing output like they did for coal.
  
2) what are they doing with investment securities, its not core business...

ahh. too tired liao...

(16-11-2016, 12:53 AM)BlueKelah Wrote:

(15-11-2016, 10:01 PM)sgmystique Wrote: Innotek seems to be getting back on the path to profits under Mr. Lou Yiliang who was appointed on 2 November 2015, as Executive Director of the Group and Chief Executive Office ("CEO") for Mansfield Manufacturing Company Limited ("Mansfield"). This stock was once a favorite for yield lovers having given out dividends of 5 cents every year (from 2008 to 2011) and then dividends of 1 cent for 2012 & 2013 before stopping them from 2014. The company had a large cash balance which allowed them to pay out these dividends inspite of being loss making since 2011. 

The pertinent numbers for 9M16:

Revenue: $159.352 mil
Net Profit: $6.812 mil (with NP in 3Q16 being $5.017 mil)
No. of shares: 223.835 mil (+ 22.821 mil being held as treasury shares. These were bought back at prices well above the current share price)
EPS: $0.0304 (for 9 months)
NAV: $0.529
Current Assets - Total liabilities: $54.381 mil
Cash on hand: $22.019 mil
Short term debt: Nil
Long term debt: $0.077 mil
Current market cap: $49.24 mil (At today's closing price of $0.22)

Innotek is practically a zero debt company. If they are able to keep up the performance moving forward this stock could provide decent returns for its shareholders both in terms of a restart of dividends as well as a turnaround in the share price as well.

Look forward to viewpoints from other Valuebuddies who may be tracking this company.

had a quick look,
whilst valuation looks good, profit has had a big jump and  there are a few questions that need to be answered.

1) Revenue has been quite flat, this past year, it seems profit comes mainly from cost of sales being much lower than last year. What if metal price spike? I read that China is now consolidating 10 tangshan steel makers into one big company and curbing output like they did for coal.
  
2) what are they doing with investment securities, its not core business...

ahh. too tired liao...

Few thoughts on the points you have raised:

1) Revenue has been quite flat, this past year, it seems profit comes mainly from cost of sales being much lower than last year. What if metal price spike? I read that China is now consolidating 10 tangshan steel makers into one big company and curbing output like they did for coal.

Yes profitability has increased solely based on the cost of sales being much lower than last year. This is due to (a) Inventories recognised as an expense in cost of sales being around $4 mil lesser than the corresponding 3Q15 while revenues decreased by around $3 mil (b) Depreciation was lower by around $0.6 mil © Wages and salaries being lower by around $3 mil as compared to the corresponding quarter last year.

Metal prices spiking will obviously lead to an increase in costs which might dent their profitability going forward unless they are able to pass on the increased  costs to their customers. This is something I currently have no visibility on. 

But what I am more enthused by is their increase in productivity with the Q3’16 wages and salaries lower mainly due to a decrease in direct and indirect labor headcount (September 2016: 3,015, September 2015: 4,128) and reduction of overtime expenses. Retrenchment cost was S$0.4 million for Q3’16 and S$1.6 million for 9 months ended 30 September 2016. Assuming status quo being maintained on all fronts moving forward they should have the benefit of not having to pay any retrenchment costs as well.


2) what are they doing with investment securities, its not core business...

Innotek has been investing their excess cash into investment securities for some time though it is not their core business. They managed to get out of Sabana REIT in 2Q15 with some profits. The Board has approved to change the Mandate towards a higher mix for bonds in Q2’16 to reduce financial risk due to the volatility of the global equity markets. This should hopefully keep their capital safer. Of course one would be more comfortable if they could just use these resources in their core business or return excess cash to shareholders!

Anyways I look forward to their Annual Results in Feb next year to see if they are able to maintain the $5 mil profitability per quarter. Seeing the trend for the last few quarters since the new ED has taken over I am quiet hopeful of better times to come.

Oic so the securities is for bonds. Seems like bond market is going down recently and projected to get worse as interest rate goes up in december and more next year..

Increase in steel price is confirm one if china is cutting output drastically.

Share price however has gap up accordingly to this jump in profit.

sent from my Galaxy Note 7

Innotek has doubled in price to $0.26 today since Mr. Lou Yiliang made his first on-market share purchase at $0.13 on the 8th April 2016. This seems to have been a clear indicator of top management purchases leading to better times ahead. Looking at the drastic turnaround in the bottomline, I feel the future should be quiet profitable for Innotek.