CDW Holdings

[BlueKelah]

Sent a query on the company website contact and got email reply from the CEO from HK today to one of my queries and quite impressed as he took the time to educate me on why the "denominated in foreign currency" cash is less than the total cash equivalents. Unfortunately it means we still dont know how much of the cash is in Chinese banks.

Otherwise $ for $ this company at this price is a no brainer. cash is cash after all. At least you are getting all the other assets and business for FREE.

Any sort of positive news will see it going up a lot I reckon. Good for accumulation at this cheap price.

Given the treasury shares will be used up by the stock options, we can expect share buybacks 20-30million shares to start again to refill the treasury shares. If you factor in stock options all converted at todays price, company will only be using up 600k+ of the SGD80million(USD50 million) they have to subsidize the stock options, dilution very minimal and net cash will still be 100%

Parent company may decide to delist also if price becomes too cheap.

--vested--

[heifien91]

Just finished looking at the company, and would say at current prices the company is relatively cheap - PE 4.72, EV/EBITDA -2.12 and normalised FCF yield of 13.64%. However, to me it is cheap due to uncertainty of the company's future prospects.

Questions:
1) Their key business segment being the backlit LCD screens, who are their main customers? Smartphones these days do they actually use LCD screens? Even the desktop screens these days, my impression when I was still customizing computers in 2012, most screens seems to have switched to LED screens already due to its thinner and more elegant nature.
2) Anyone know who are some of their main competitors? Preferably listed ones as this being a relatively low margin business, we should get a feel if any of their competitors are actually facing the same low margins or there are some which are more exceptional?

Well all in all, given how I do not really understand this LCD screen industry yet I feel that it is quite risky to actually invest in CDW. To me LCD seems like the thing of the past something like what nokia phones are using back then. But of course, this is just based on my limited knowledge of this field.

(not vested)

[BlueKelah]

Actually all LED screens on laptops are LCD screens just with different backlighting. The difference between LCD and LED is that LED screens have a line of "backlights" made of LEDs that makes the screen brighter. That's why you may have heard the term "LED backlit"

this link should help in understanding the technology....
http://www.screentekinc.com/backlight-cc...ined.shtml.

For mobile/handhelds, lots use the LED displays, such as iphones uses LED backlit TFT LCD. Only Samsung Galaxy S5 and Notes however use the OLED which is much more vibrant but tend to burnout after a few years and lose the vibrancy.

CDW supplies to Japanese manufacturer but I guess maybe korean makers are causing some competition. Though having said that, Iphone screens are made by Sharp now.

So CDW is definitely not in a sunset industry. Main challenge will be to find new customers in Japan. I initially thought customer was Sony but looking at website and AR, the mobile handset picture looks very like the Nintendo DS, which we all know is not doing very well .

Steady dividend payout past 10 years (current yield 6% plus), trading almost at 94% cash level and net cash, low PE and profitable, MOS 23% today. only risk being mismanagement of cash hoard by china side, but that issue should have been solved and lots of company "policy" put in place.

Limited downside, plenty upside potential.

[heifien91]

Cool! Thanks for the link. I find the business really interesting..only wish I know someone within this industry to talk to and understand it like the whole processing chain etc. After digging through the ARs yesterday, I would agree they arent a sunset industry. However, the volume of backlight units supplied to smartphones is really minor compared to that to gamesets. Plus we know that their gamesets division seems to be dying off already, and the CEO did comment that it is a permanent trend. Just wonder are they able to increase capex to beef up their production of backlight units for smartphones or is it because their current technology do not support those that samsung/apple/xiaomi are using?

[Shrivathsa]

MONDAY, 10 DECEMBER 2012 : The Edge.

http://www.theedgesingapore.com/componen...&showall=1

For the nine months ended Sept 30, the group reported 7.5% increase in revenue to US$133.8 million ($163 million) from US$124.5 million last year. The increase is driven by the group’s mass production of LCD back- light units for a newly launched electronics game set as well as other LCD parts and accessories, which started in 2Q2012. Stable orders for these LCD backlight units are expected until the end of the current financial year. Net profit for the nine-month period saw an increase of 99.9% to US$8.2 mil- lion from last year.

The group’s LCD backlight segment accounts for more than half of the group’s sales. Sales increased 5.7% y-o-y to US$83.8 million in the nine-month period. It manufactured 3.6 million units for handsets and 28 million units for gamesets and cameras versus seven million units for handsets and 28.5 million units for gamesets and cameras in 9M2011

In that period, the launch of new game set was Sony.

So, in a way, if you buy CDW, you are banking on Sony Playstation, i guess.

As a trading stock, less than 14 cents entry and above 16 cents exit seems to be the way to go, at least over the last 3 years.

http://sgx-stocks-sti.blogspot.sg/2014/0...dings.html

[BlueKelah]

You mean PlayStation Vita rite, the new ps4 doing very well but has no backlight screen, only touch screen.

[maximillian]

Hi Guys, this will be my first post of my observation.

understand from their AR 2013 there are three segment.

1) LCD backlight. with majority of the unit sold coming from game set. (ref 2014 Q1 result pg 11)
2) Office Automation
3) LCD parts and accessories

LCD backlights
referring to page 7 of AR2013. The Directors recognise that there is a sift in consumer behaviour towards handsets. Thus there is an increasing demand in this segment. The gameset segment decline is not temporary So imo, i don't think its enough to compensate for the lost from revenue in gameset over a short run.

Further reading into Q1 2014 report pg 11: "COGS has increase due to a higher volume from high value items." So I suspect that the handset segment has a lower GP margin.

On top of that, pg 8 of AR 2013. " the weakening of JPY has its pros and cons. Pros being they will be able to purchase material at a lower cost. Cons being that the Japanese companies will be better off producing the products back in Japan instead of outsourcing to CDW. This imo is not something which you can hedge. Its a business risk.

Office Automation
This segment is in a decline due to weak demand in PRC and Japan. ref Q1 2014 report pg 11.

LCD parts and accessories
This is something that i am curious about. In AR 2013, pg 7. The director mention that there will be a reduction of orders from a major customer and there is no guarantee that the order will be replaced by new customers. when i look at Q12014 commentary, there is an increase in revenue which is caused by an introduction of a new product which had continue manufacturing into Q12014.

Not sure if this relates to the orders from this major customer. If it is, this segment might face a decline as well.

Overall gearing is at a low level.

Let me know if i missed out anything.

Vested but thinking to divest, thus may be bias.

[BlueKelah]

Ohaiyo, Kyo wa Ogenki Desuka?? (Hello, how are you today??)

A bit late but since no one updates and no one noticed I will be covering this bugger,

2Q14 Results released 14 August 2014 here
CDW 2Q14 Results 14/08

[Business Environment
In the first half of the current financial year (“FY2014”), the Group experienced a general slowdown in customer orders. Management has secured orders for new models from customers in the second half of FY2014.

The persistent inflation and increasing labour cost associated with tightening labour supply in the PRC, where the Group’s production facilities are located, have outweighed the productivity gains from the deployment of more efficient production equipment and processes. In the first half of FY2014, the weakening Chinese Renminbi and Japanese Yen against United State dollar has been so moderate that it would not materially affect the Group’s performance

Business segment outlook
The LCD Backlight Units segment suffers from slowdown in sales orders of phased-out old models. Volume orders of new models have been secured for the second half of FY2014, and Management continues to explore new customers in the PRC. It is the market trend that LCD backlight units for smart phones and tablets will dominate this segment. Such bigger size of LCD backlight units, albeit with higher average selling price, would lead to a lower profit margin compared to small size LCD backlight units as bigger size LCD backlight units require a higher proportion of materials. This trend is expected to persist in the foreseeable future. For ultra-thin backlight units, there had been a shortage of a key part due to production difficulty, and management is working to ensure a stable supply as any shortage of such part may interrupt the delivery of ultra-thin backlight units and reduce sales to the Group’s key customer.

Contending against the weak and sluggish demand in the LCD Parts and Accessories and Office Automation segments, Management continues to focus its effort on securing orders of parts for tablets and super-thin, lightweight notebooks in the LCD Parts and Accessories segment and developing new products in the Office Automation segment.
Overall, Management remains optimistic towards the performance of the Group’s operation for FY2014.]
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Quick look............
1H EPS USD 0.67₵ (2Q EPS USD 0.37₵)

USD 0.5₵ ~ SGD 0.625₵ Div XD 2nd Sep (4.24% yield)<- so fast
Total YTD Div Yield 12.72%

Net cash drop to 88% Mcap (SGD 13c/share)

20% MOS remaining

[specuvestor]

Thought the major issue is the hand held game set business since smartphones became main stream? Is the delta of that part of the biz insignificant to PnL already?

[GFG]

The Board of Directors of CDW Holding Limited (the “Company”) wishes to announce
that the Company’s wholly-owned subsidiary, Tomoike Industrial (H.K.) Limited
(“Tomoike HK”) has on 14th October 2014 entered into a definitive Letter of Intent
and a supplemental agreement (collectively the “LOI”) with Suzhou Industrial Estate
Jia An Investment Company Limited (苏州工业园区嘉安投资有限公司)（the ”JV
Partner”）to establish an equity joint venture company (“EJV”) in Suzhou, the
People’s Republic of China (“PRC”).

This is how they are planning to utilise their cash hoard