Spindex Industries

Hi All,

This has been another one of those quiet and steady performers. Spindex came out with very decent results for the FY ended 30 June 2010. Salient numbers are listed below:

Revenue: SGD82.053 mil (+28% over FY09)
Net Profit: SGD6.096 mil (+33% over FY09)
Net Assets: SGD57.704 mil
Short Term Debt: SGD 0.349 mil
Long Term Debt: Nil
Cash & cash equivalents at end of FY: SGD22.356 mil (20.757 mil in FY09)
EPS: S$0.0528 (S$0.0398 in FY09)
NAV: S$0.5002 per share (S$0.4629 per share in FY09)
Dividend: 1.85 cents/ share (1.4 cents/ share in FY09)

Most importantly Spindex had purchase of property, plant and equipment worth S$5.329 mil in FY10 which is a huge jump from the S$1.189 mil it spent on the same in FY09. The full impact of these new purchases should be evident in FY11.

Spindex is currently available at 33.5 cents (Market cap of SGD38.6 Mil). Would appreciate inputs on a fair valuation for this silent performer.

Glad to finally see a thread on Spindex. Another one of dydx's picks (dare I say favourites?)
Totally agree that this is a silent performer and has been one of my favourite holdings too.

Dividends:
0.0185 cents per share is a record payout. But at a payout of some 2.13mil dollars, I think it is within Spindex's ability to maintain this level of payout in future with 10yr avg Free Cash Flows of 4.1mil dollars. That's translates to a dividend yield of 5.5% at current prices. Not mind-blowing but still reasonably attractive.

Instrinsic Value:
By my calculations, Spindex is still far far away from intrinsic value (IV). It's even below the 50% margin of safety (MOS) from my calculated IV. As pointed out above, still well below NAV.

My beef with Spindex is that it deals in an industry where it probably competes on cost (hence the thin net margins) and I'm not sure how much of a branding one can do with precision equipments. Anyone in the industry please enlighten me. I'm really not in the know about this industry.

Of course, as d.o.g pointed out in Afralug before, most institutional investors are likely to avoid such small caps as they deploy capital in the millions which would mean easily triggering a take-over so this is one for the long-run and at current valuations, I think it's worth it.

I remember that there was a forummer by the name of 'Starbugs' who did pretty good analysis of Spindex as well. Last saw him/her in the CNA forum posting on Spindex as well.

Based on the 115.365m issued shares and the last done share price of $0.335, Spindex's market cap now is only $38.65m. Simply compare this number with Spindex's key financial figures - FY09 (ended 30Jun10) Revenue of $82.05m, NP of $6.1m, after-tax FCF (adjusted for forex; before capex) of $11.2m; and 30Jun10's Equity of $57.7m, nett cash reserve of $22.46m.....
http://info.sgx.com/webcoranncatth.nsf/V...C002E2D10/$file/SpindexFY2010Announcement.pdf?openelement
- it doesn't take much analysis to see that Spindex at $0.335 remains grossly under-priced by Mr Market.

As Spindex is well-managed and the underlying business is decently profitable - and more importantly, generating solid FCF: in FY10, at a rate of 13.7% on revenue, or 21% on 30Jun09's Equity of $53.41m - rationally, its fair value should be at a decent premium above its Equity (or Net Assets) of $57.7m.

Logically speaking, we should value Spindex's operating business based on a reasonable multiple of its recurrent earnings (or NP) or FCF. On top of that, we should attach additional value to Spindex's large and growing net cash reserve, which is distributable anytime.

A very conservative 5x multiple on Spindex's FY10's FCF of $11.2m, will give $56m - equivalent to a PER of 9.2x on FY10's NP of $6.1m - for the operating business. Adding $22.46m for the nett cash reserve will give a total fair value of $78.46m for the entire company, or $0.68/share (vs. 30Jun10's NAV/share of $0.50).

I believe tha above valuation is conservative as Spindex's business is poised to expand further, and I doubt very much Chairman/controlling shareholder Tan Choo Pie would be easily moved if such an offer is made.

Spindex's just released FY10 (ended 30Jun10) AR makes interesting reading.....
http://info.sgx.com/listprosp.nsf/07aed3...b002c075d/$FILE/Spindex%20Industries%20AR2010.pdf

After reading Tan Choo Pie's Chairman Statement, it is evident that Spindex is pushing systematically to expand/upgrade its production capacity as well as to increase its customer base further. Based on Spindex's solid operating track record, I suppose we can reasonably expect better profits to come.

Was going thorugh Spindex's annual report. They have a net cash balance of

1. Cash and cash equivalents as at 30 June 2010: S$22.356 mil
2. Short term debt: S$0.349 mil
3. Long term debt: NIL
4. Book Value of their 4 properties: S$10.111 mil (Assuming they can realise this value on sale today)
Net: 1-2-3+4= S$32.118 mil

and the company is valued at S$36.92 mil (115.365*0.32) as on date. Their cash balance coud have been higher if not for the additional capital investments they have made last year which should hopefully lead to higher profits moving forward.

I sometimes wonder if the market is missing out on a great deal or is there some glitch which I cannot see...

(14-10-2010, 05:36 PM)dydx Wrote: Spindex's just released FY10 (ended 30Jun10) AR makes interesting reading.....
http://info.sgx.com/listprosp.nsf/07aed3...b002c075d/$FILE/Spindex%20Industries%20AR2010.pdf

After reading Tan Choo Pie's Chairman Statement, it is evident that Spindex is pushing systematically to expand/upgrade its production capacity as well as to increase its customer base further. Based on Spindex's solid operating track record, I suppose we can reasonably expect better profits to come.

taking a look at this after the XD- from recent 33.5 cents, now a good 3 cents down to 30.5 cents.

the market must wake up to this small gem soon!

(04-11-2010, 05:39 PM)gimbeng Wrote: taking a look at this after the XD- from recent 33.5 cents, now a good 3 cents down to 30.5 cents.

the market must wake up to this small gem soon!

Hi gimbeng!

(04-11-2010, 05:48 PM)taka666 Wrote:

(04-11-2010, 05:39 PM)gimbeng Wrote: taking a look at this after the XD- from recent 33.5 cents, now a good 3 cents down to 30.5 cents.

the market must wake up to this small gem soon!

Hi gimbeng!

Hi Taka!!
anyway do take a look at this counter with fairly good dividends, steadily producing FCF as per dydx's analysis

How is the competition for Spindex like? Does it have a wide economic moat?

i don't think spindex has a wide economic moat, but looking at the numbers and its regular dividend payout, spindex is more of a nimble small player in this field..