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15-05-2013, 06:58 PM
With the Yong brothers still holding a combined approx. 60.3% interest in Nam Lee, and the 3 IDs being experienced and conservative people, and the General Manager and Financial Controller both are qualified accountants and tested, proven employees, I will be very surprised if Nam Lee would throw away $6.155m of its $41.6m (as at 31Mar13) net cash reserve into some 'dud' bonds.
As for the 15% drop in Revenue and 20.1% drop in PBT in 1Q, Nam Lee's management has said that it is "mainly due to a decrease of sales volume in aluminium industrial products" - i.e. orders from Carrier Transicold for customised aluminium frames (used to mount the refrigeration units in reefer containers) have fallen, in line with the current weakness in global shipping and goods trade. For this we have to bear in mind that Nam Lee has been the sole supplier of the aluminium frames to Carrier Transicold for a long time now (more than 10 years?), and the working relationship between the 2 has been tested by many 'up and down' cycles in container shipping. When container shipping recovers or booms again, Nam Lee will have to ramp up production and will enjoy good volume-driven gains; when orders from Carrier Transicold are down, Nam Lee will have to rely more on the construction industry (including HDB's building programme) in Singapore. I should add that this rather smart strategy has worked very well for Nam Lee over all the years. In fact, orders from Carrier Transicold provide Nam Lee a steady base load in running probably the largest of such metal forming capacity in Singapore/South Malaysia, and enable Nam Lee to quite comfortably cover a big portion of the group's total fixed costs. This also allows Nam Lee to operate more comfortably in the very competitive local construction industry, by focussing on better or higher-margin projects from better-quality developers or main-contractors.
I should also add that there is evidence that the trading relationship between Nam Lee and Carrier Transicold is a very special one designed like a long-term business partnership based on true mutual interests. In FY12 (ended 30Sep12), Nam Lee suffered $1.661m in net forex loss, and a big portion of that amount was reimbursed by Carrier Transicold. Based on my experience, this has rarely happened in other companies.
One thing is quite certain, when global container shipping recovers, Nam Lee's factories will again be churning out many more aluminium frames for Carrier Transicold. Meanwhile, the orders and volume would be smaller and limited to just replacement of old reefer containers. Whatever it is, reefer containers are crucial for shipping of foodstuff (meats, bananas, etc.), and Carrier Transicold as the clear global leader should remain a volume champion for many years to come.
As for the 15% drop in Revenue and 20.1% drop in PBT in 1Q, Nam Lee's management has said that it is "mainly due to a decrease of sales volume in aluminium industrial products" - i.e. orders from Carrier Transicold for customised aluminium frames (used to mount the refrigeration units in reefer containers) have fallen, in line with the current weakness in global shipping and goods trade. For this we have to bear in mind that Nam Lee has been the sole supplier of the aluminium frames to Carrier Transicold for a long time now (more than 10 years?), and the working relationship between the 2 has been tested by many 'up and down' cycles in container shipping. When container shipping recovers or booms again, Nam Lee will have to ramp up production and will enjoy good volume-driven gains; when orders from Carrier Transicold are down, Nam Lee will have to rely more on the construction industry (including HDB's building programme) in Singapore. I should add that this rather smart strategy has worked very well for Nam Lee over all the years. In fact, orders from Carrier Transicold provide Nam Lee a steady base load in running probably the largest of such metal forming capacity in Singapore/South Malaysia, and enable Nam Lee to quite comfortably cover a big portion of the group's total fixed costs. This also allows Nam Lee to operate more comfortably in the very competitive local construction industry, by focussing on better or higher-margin projects from better-quality developers or main-contractors.
I should also add that there is evidence that the trading relationship between Nam Lee and Carrier Transicold is a very special one designed like a long-term business partnership based on true mutual interests. In FY12 (ended 30Sep12), Nam Lee suffered $1.661m in net forex loss, and a big portion of that amount was reimbursed by Carrier Transicold. Based on my experience, this has rarely happened in other companies.
One thing is quite certain, when global container shipping recovers, Nam Lee's factories will again be churning out many more aluminium frames for Carrier Transicold. Meanwhile, the orders and volume would be smaller and limited to just replacement of old reefer containers. Whatever it is, reefer containers are crucial for shipping of foodstuff (meats, bananas, etc.), and Carrier Transicold as the clear global leader should remain a volume champion for many years to come.