Cheung Woh Technologies

Notwithstanding the fall in revenue and small NP of $553k in 3Q, Cheung Woh continued to generate decent positive FCF (before capex and WC changes) at the rate of some 14% on revenue. And borrowings level continued to fall, and as at 31Aug12 Cheung Woh remained in a nett cash position. However, it is a little disappointing that the Interim dividend has been cut to only $0.005/share (from $0.003/share previously).

Cheung Woh has also announced the disposal of a further 1.66% interest in PRC-based associate Tysan Precision (engaged in the manufacture of metal seat recliners and seat tract adjusters) for USD503k (valuation basis: NTA) in cash.....
http://info.sgx.com/webcoranncatth.nsf/V...200106CAE/$file/Tysan_Precision_Transaction_Ann.pdf?openelement
With this disposal, Cheung Woh's interest in Tysan Precision will be further reduced to 31.34%. On the same valuation basis, the remaining interest is worth some USD9.5m.

Today is turning out to be an interesting trading session for Cheung Woh shares. At the time of writing, 16.25 hrs, just under 1.9 Million shares had changed hands - all at S$ 0.17 per share. This is is the highest daily volume in over 19 months. It will be interesting to see if this is a further spurt of buy-backs (a mandate is in place). We'll see.

Cheung Woh has been "unloved" of late.

Vested

Lim & Tan wrote a report today - http://www.remisiers.org/cms_images/rese...-daily.pdf - where it believes the worst is over for the PC industry and upgrades the local HDD stocks (including Cheung Woh) to accumulate.

(Not Vested)

Thanks for your response Nick and for sharing the Lim & Tan report - as a further "proof point" of the view that things have bottommed out in the HDD business....... it seems that Cheung Woh's management is sufficiently confident in the outlook to re-initiate its share buy back programme ............. and to do so in a major way. 1,900,000 of the 2,095,000 Cheung Woh shares traded on the SGX today were "bought back" by Cheung Woh, all at S$ 0.17 per share.

Vested,

(12-12-2012, 05:44 PM)Nick Wrote: Lim & Tan wrote a report today - http://www.remisiers.org/cms_images/rese...-daily.pdf - where it believes the worst is over for the PC industry and upgrades the local HDD stocks (including Cheung Woh) to accumulate.

(Not Vested)

Please be reminded that tablet is growing at the expense of PC / notebook. Tablet uses NAND flash as its memory not HDD.

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Solid state drive is the disruptive technology. Even on a notebook, waiting time is cut down dramatically when SSD is used instead of HDD. Yes, there is a price premium but it is narrowing. More uses would opt for a smaller capacity SDD (due to cost) and use HDD as an external storage (via USB). This couple with strong tablet growth....do your sums

Of course, Cheung Woh under the control of the Law Family (also the founder and majority shareholder) must have done their sums before buying back 1.9m shares yesterday at $0.17/share, and are likely buying more shares from the open-market today. Based on my own estimates, the Law Family - who as a whole holds a total 231.486m shares - has raised their combined stake to and now controls approx. 76.28% (based on the latest 303,452,800 outstanding issued shares, after yesterday's share buy-back) of Cheung Woh. To Cheung Woh and the Law Family as its biggest shareholder, paying out more cash dividends is the direct alternative to using the company's cash reserve to buy back more shares. The fact that Cheung Woh has chosen to buy back more shares suggests that this is a more expedient - and perhaps also a cheaper way - for the Law Family to raise their interest in Cheung Woh further.

As for the possible intentions behind the Law Family's desire to raise their stake in Cheung Woh - even though the underlying business presently is suffering a little under a seemingly temporary fall in global demand for HDDs - my own thinking remains that Cheung Woh is a ripe privatization candidate, either by way of an offer from the Law Family or a 3rd-party buying from the Law Family.

another 1530 lots done today, should be CW share buyback...

Looks like setting the stage for something BIG! :O

(13-12-2012, 05:32 PM)brattzz Wrote: another 1530 lots done today, should be CW share buyback...

Looks like setting the stage for something BIG! :O

.............. and of those 1,530 lots of Cheung Woh shares traded today that brattzz refers to in his posting of earlier this evening, 1,050 (or ~ 68.6%) were purchased by Cheung Woh as part of their "buy-back" programme. Clearly Cheung Woh's management has QUOTE done their sums UNQUOTE, to coin a recent phrase used on this thread. Time will tell if the Laws and other members of Cheung Woh's Management Team and the BoD are correct.

Since Cheung Woh started their buy-back campaign in 2011, they are surely not far off having acquired ~ 9% of the companies outstanding share base. IMHO, this is a striking and commendable vote of confidence in the company's prospects.

Vested.

It took some time to digest Cheung Woh's latest financial results, i.e. for the quarter ended 30th November 2012...............

http://info.sgx.com/webcoranncatth.nsf/V...C0031C0E9/$file/CheungWoh_3rd_Quarter_FY2013.pdf?openelement

While I'm pleased to read that management is positive regarding the prospects for the Precision Metal Stamping Component segment of their business, it is sobering to note that HDD sales are down yet again (y-o-y & q-o-q). I believe this is the 6th consecutive quarter for which HDD related sales have decreased. Lim & Tan noted that QUOTE at 0.6x price to book, the company is trading at the lower end of its five year historical price to book range of 0.2-1.3x UNQUOTE.

I take heart from:
a) the recent resumption of Cheung Woh's share-buy-back programme - this appears to have established a floor under the share price at the S$ 0.17 level (at least for now) - this demonstrates Management's confidence in the business, and
b) pronouncements made by Seagate and the like that HDD sales are picking up - although such pronouncements seem at variance with recent statements of Armstrong and Cheung Woh, who charachterise their view of the near-term HDD business with words such as "challenging" and "soft".

One for the brave? Lim & Tan reported out a couple of research pieces this last week and I note that they remain "neutral" on the HDD sector. At the very least, I sense this one is going to take more time to turn around. But I would also suggest that Cheung Woh's net cash position of ~ S$ 7 Mln will help it weather any extension of challenging times for the HDD market.

Vested

Sharp drop in share price to 14cts due to dividends cut and shifting of factory to Iskandar...
FY results remains negative..and will be negative due to shifting...

Turnover -54%
Gross profit -71.8%
Net cash flow generated from/(used in) operating activities 1,379 (4,314)

The HDD components business segment remains challenging mainly due to slower global
economic growth, and the decrease demand for HDD due to alternative memory devices.
However, the Group has secured approval to supply components to another major HDD
manufacturer. Overall we expect this segment to perform better next year.
The Precision Metal Stamping component segment is expected to do well.
Barring any unforeseen circumstances, the Board of Directors expects the Group’s performance to
improve in the next financial year.