InnoTek

Just want to highlight that FuYu payout ratio was >100% for a ~7% yield. Fu Yu is not doing well for a few quarters already. Today's volume is really high for Fu Yu, is privatisation on the cards? 

Quote:The Group has proposed a final tax exempt dividend of 1.0 cent per share. Together with the interim dividends of 0.5 cents per share, the Group’s total dividends with respect to the financial year ended 31 December 2016 (“FY2016”) would be 1.5 cents per share, which translates to a dividend payout ratio of 107%. 

http://infopub.sgx.com/FileOpen/Fu%20Yu_...eID=440273

List of Fu Yu's quarterly results: http://www.fuyucorp.com/quarterlyresult.asp

InnoTek's payout is 9.7% (0.5cts dpu / 5.17 cts eps) for ~1.3% yield. Assume a similar payout as Fu Yu's, you'd get ~10% yield at least. I also think that its results is being understated because there was a non-recurring retrenchment cost of S$1.8m (direct & indirect labour) and S$0.4m (G&A). 

- vested, dyodd -

Hmm, I did a refresh on InnoTek's website refresh and there seems to be some subtle changes for the company's description..

Quote:Mansfield Manufacturing Company Limited is a precision metal component manufacturer serving key markets of Office Automation, Automotive, Electronics, Displays, Printing, Consumer Electronics, Healthcare and Industrial applications. 

Hopefully, they've added and diversified their customer base. I looked at InnoTek's operating profit of 13.1m vs its market cap of $88.5m. I took it to compare with Fischer Tech's operating profit of 15.8m vs its market cap of $150.6m. There seems to be quite a value gap which I hope InnoTek can close it.

http://www.taipeitimes.com/News/biz/arch...2003675422 InnoTek's customers doing well.

Q2FY17 results - http://infopub.sgx.com/FileOpen/Q217Anno...eID=466779

The Group’s revenue for the April-to-June 2017 quarter (“Q2’17”) decreased by S$1.6 million or 3.2% to S$49.0 million from S$50.6 million in Q2’16.

The lower revenue was mainly due to:

(1) Revenue decline from the Precision Components segment, due to lower demand for office automation and consumer products. Certain major Japanese customers have also migrated new production programmes from China to plants in South East Asia. In addition, sales for automotive products were slightly lower as current programmes are nearing end-of-life while mass production from some newly secured automotive programmes will only start next year.

This was offset by:

(2) Revenue increase from the Precision Machining (previously named as Precision subassembly) due mainly to the higher sales from TV Bezel programmes in Q1’17 as compared to Q1’16.

(3) Tooling sales increased in Q2’17 compared to Q2’16. Tooling sales in Q2’16 was affected by the relocation of Feng Chuan Dongguan to consolidate its operations with Suns Mansfield Dongguan.

Innotek made an operating loss of $44k if we do not take into account dividend income and rental income from the investment portfolio and investment properties.

Share price is 33 cents, down 16.5% at the moment with the market cap of the company at $81.4M. Innotek still has strong cash position at $31M. If we take the investment portofolio into account, it would be $46M.

Pretty disappointing as no interim dividend was paid. It looks like the next 2 quarters would be pretty tough for Innotek going by their outlook in the quarterly report for the OA segment as well as the TV bezel segment.

(vested)

I encourage buddies to go for AGM and not just rely on forum comments to make decision on buy or sell. I immediately sell on spot when I attended the last AGM at Raffles hotel as the mgmt had been honest in informing the shareholders that company need more time to see results. 2017 is definitely not the year yet.

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I do not see any catalysts for this stock till 2018 when new programs kick in. Their 3 business segments are now under pressure.
Fortunately their balance sheet is strong. If costs can be well managed and under control, this will put the company in good stead when the 3 business segment business pick up again.

Last 3 quarters, the company have been quite focused on restructuring and streamlining costs and manpower. Therefore, it turned around and delivered bottom line despite declining revenue from OA. With a better cost structure, next stage is securing in more customers and revenue streams/programmes. New Amata factory is a good location in Thailand.

Interestingly, both Fuyu and Innotek reported similar declines in net profit but market bashes down the latter more while aceding higher valuation for Fuyu. So who is right? 

I think investors are prepared to hold on to InnoTek as it continues its restructuring and find a sustainable path towards growth, hence, the low valuations. Just to keep in mind, InnoTek is rather illiquid so I am not too surprised by the steep decline as investors rush out.

Numbers Analysis
• Gross profit dropped by 8.8% because of a higher cost of goods sold.
• Under cost of sales, the company managed to reduce depreciation, wages and salaries to keep its operations leaner.
• Under administrative expenses, it incurred higher bonus provision of S$0.3million.
• [2Q’ FY17] It also incurred an exchange loss of S$420k, allowance for doubtful debts of S$136k, net fair value loss on trading investments of S$104k, loss on derivative (unrealised) of S$121k. Adding up together, it is a non-recurring loss of S$781k.
• Adding these back to profit before taxation (S$789k + S$781k), the 2Q’ FY17 adjusted figure should come up to S$1.57m.


• [2Q’16] InnoTek enjoyed currency gain of S$414k, write-back of allowance for doubtful debts of S$180k, gain on dispoal of PPE of S$117k, loss on derivative (unrealised) of S$242k,net fair value gain on held for trading investments of S$42k. Adding together, it is a non-recurring gain of S$511k.
• Adjusting these back to profit before taxation ($2,493mil - $511k), the 2Q’ FY16 adjusted figure should come up to S$1.982m

• The actual drop (profit before taxation) should be 21% instead of 68.4%.

The bad
• The costs in China are rising, hence, major office automation customers pull out from China and moved to lower-cost countries in Southeast Asia.
• Revenues from newly-secured automotive programmes will start next year.
• The TV segment remains competitive because a major customer changed the design of its TV bezel, replacing the bottom portion with plastic instead of a full aluminium TV bezel to reduce costs.

The good
• The management is doing their best to mitigate the pull out by expanding its product portfolio to include children’s car seats (automotive) and a heat-sink (TV business) product. The revenues for above will kick-start by end of the year.
• They have been increasing sales efforts as well.
• Their Thailand expansion is proceeding as planned and first down-payment (S$0.2m) of land in the Amata City (Rayong) Industrial Estate is provided. It will be completed in the first half of FY2018 and production to commence in the second half of FY2018. Meanwhile, operational activities will be supported from Dongguan until the completion of Mansfield Thailand.


Lou Yiliang, Chief Executive Officer commentaries:

“We continue to focus on strengthening the business for this year. Internal efficiencies, new customer acquisitions and new product innovations will be the main initiatives for our next phase of restructuring. With the orders coming through for our heat-sink product, we hope to build on this momentum as we strengthen our portfolio. “FY2017 will likely be a crucial transitional phase as we work on both our restructuring efforts as well as our Thailand investments. We will focus on setting up the Thailand plant while also striving to continuously expand our customer base.”

(14-08-2017, 03:00 PM)MOV Wrote: Last 3 quarters, the company have been quite focused on restructuring and streamlining costs and manpower. Therefore, it turned around and delivered bottom line despite declining revenue from OA. With a better cost structure, next stage is securing in more customers and revenue streams/programmes. New Amata factory is a good location in Thailand.

Interestingly, both Fuyu and Innotek reported similar declines in net profit but market bashes down the latter more while aceding higher valuation for Fuyu. So who is right? 

Well if you are really convinced about the management and business direction for Innotek, perhaps the market is giving you an opportunity to load up at a lower cost.

That should be a good thing I guess 

(14-08-2017, 03:56 PM)kelvesy Wrote: I think investors are prepared to hold on to InnoTek as it continues its restructuring and find a sustainable path towards growth, hence, the low valuations. Just to keep in mind, InnoTek is rather illiquid so I am not too surprised by the steep decline as investors rush out.

Numbers Analysis
• Gross profit dropped by 8.8% because of a higher cost of goods sold.
• Under cost of sales, the company managed to reduce depreciation, wages and salaries to keep its operations leaner.
• Under administrative expenses, it incurred higher bonus provision of S$0.3million.
• [2Q’ FY17] It also incurred an exchange loss of S$420k, allowance for doubtful debts of S$136k, net fair value loss on trading investments of S$104k, loss on derivative (unrealised) of S$121k. Adding up together, it is a non-recurring loss of S$781k.
• Adding these back to profit before taxation (S$789k + S$781k), the 2Q’ FY17 adjusted figure should come up to S$1.57m.


• [2Q’16] InnoTek enjoyed currency gain of S$414k, write-back of allowance for doubtful debts of S$180k, gain on dispoal of PPE of S$117k, loss on derivative (unrealised) of S$242k,net fair value gain on held for trading investments of S$42k. Adding together, it is a non-recurring gain of S$511k.
• Adjusting these back to profit before taxation ($2,493mil - $511k), the 2Q’ FY16 adjusted figure should come up to S$1.982m

• The actual drop (profit before taxation) should be 21% instead of 68.4%.

The bad
• The costs in China are rising, hence, major office automation customers pull out from China and moved to lower-cost countries in Southeast Asia.
• Revenues from newly-secured automotive programmes will start next year.
• The TV segment remains competitive because a major customer changed the design of its TV bezel, replacing the bottom portion with plastic instead of a full aluminium TV bezel to reduce costs.  

The good
• The management is doing their best to mitigate the pull out by expanding its product portfolio to include children’s car seats (automotive) and a heat-sink (TV business) product. The revenues for above will kick-start by end of the year.  
• They have been increasing sales efforts as well.
• Their Thailand expansion is proceeding as planned and first down-payment (S$0.2m) of land in the Amata City (Rayong) Industrial Estate is provided. It will be completed in the first half of FY2018 and production to commence in the second half of FY2018. Meanwhile, operational activities will be supported from Dongguan until the completion of Mansfield Thailand.


Lou Yiliang, Chief Executive Officer commentaries:

“We continue to focus on strengthening the business for this year. Internal efficiencies, new customer acquisitions and new product innovations will be the main initiatives for our next phase of restructuring. With the orders coming through for our heat-sink product, we hope to build on this momentum as we strengthen our portfolio. “FY2017 will likely be a crucial transitional phase as we work on both our restructuring efforts as well as our Thailand investments. We will focus on setting up the Thailand plant while also striving to continuously expand our customer base.”

This is not specific to Innotek, just a general comment.

"• They have been increasing sales efforts as well. "

I see this given as a "solution" by management whenever things are not going that well.
In many companies that I own or used to own, whenever they hit a rough patch, the announcement always includes stuff like increasing sales efforts, increasing marketing, work harder to cut costs etc

And I never thought it makes sense.

You mean when times are good, it's ok to not get the maximum sales that the company can strive to get?
So when the company hits a rough patch, one can just "increase our efforts" and suddenly improve on the results?
Why can't the management "increase sales efforts" even when the company is reporting record profits, so that the record profit will be even higher?
Similarly, why can't the management "cut costs" even when the company is reporting record profits? Why wait till tough times? If the costs can be cut, why wait till tough times to cut?

Doesn't make sense to me.
I accord 0 weightage to statements like these.

Actually it does make sense. When times are good, people don't think about efficiency. For eg cost cuttings usually happen in down cycles, hardly during up cycle.

Even on an individual level, when sales people hit their target they are no longer interested to get the "maximum sale". It is human

Without pressure from shareholders or say creditors, it is also human that people will just milk the existing assets.