CDW Holdings

[BlueKelah]

the 7.5mio only represents 10% of their cash hoard.

Not sure what the Suzhou JV will be mainly investing in though, will be interesting to see what happens going forward.

[GFG]

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--

Hey Blue
Can I ask how did you send an email query?
The company website IR has no contact listed, just wondering where you got it from. I cant find anything on their website.

Also, I don't quite understand what do you mean by "parent company"
There's no parent company for CDW.
Unless you are referring to Mikuni Co., the largest shareholder.
That's the investment vehicle of the founder Yoshimi.
He's already stepped down 2 yrs back so its unlikely he'll consider privatising the company again.
(He needs it listed to monetize his holdings)

Thanks

[BlueKelah]

Hey Blue
Can I ask how did you send an email query?
The company website IR has no contact listed, just wondering where you got it from. I cant find anything on their website.

Also, I don't quite understand what do you mean by "parent company"
There's no parent company for CDW.
Unless you are referring to Mikuni Co., the largest shareholder.
That's the investment vehicle of the founder Yoshimi.
He's already stepped down 2 yrs back so its unlikely he'll consider privatising the company again.
(He needs it listed to monetize his holdings)

Thanks

GFG : At the bottom of the homepage there is a link "contact us" if you click it will provide a web-based form to fill in your details/contact and questions. I just gave them my real email and asked about the cash and unexpectedly got a reply email directly from management which was really nice.

Yeah I am referring to Mikuni Co. Not sure what you mean by needing to keep it listed to monetize holdings?? So long as Yoshimi still has controlling stake (as per AR13 deemed interest 52.03%), surely founder will be thinking of doing share buybacks to decrease float and delist if possible at a later stage?

This is after all a profitable company with a mountain of cash of which it doesn't seem to know how to use except for doing the occasionally stock buy back for their ESOS.

Assuming major shareholder is not interested to delist, the only other way they could access and "enjoy" the cash would be to give more dividends, which CDW has been quite good at giving these past years. Probably can expect more bonus dividends if they go down this path.

Being paid to wait for delisting/takeover/bonus div is a pretty good position to be in

- still v -

[GFG]

Hey Blue
Can I ask how did you send an email query?
The company website IR has no contact listed, just wondering where you got it from. I cant find anything on their website.

Also, I don't quite understand what do you mean by "parent company"
There's no parent company for CDW.
Unless you are referring to Mikuni Co., the largest shareholder.
That's the investment vehicle of the founder Yoshimi.
He's already stepped down 2 yrs back so its unlikely he'll consider privatising the company again.
(He needs it listed to monetize his holdings)

Thanks

GFG : At the bottom of the homepage there is a link "contact us" if you click it will provide a web-based form to fill in your details/contact and questions. I just gave them my real email and asked about the cash and unexpectedly got a reply email directly from management which was really nice.

Yeah I am referring to Mikuni Co. Not sure what you mean by needing to keep it listed to monetize holdings?? So long as Yoshimi still has controlling stake (as per AR13 deemed interest 52.03%), surely founder will be thinking of doing share buybacks to decrease float and delist if possible at a later stage?

This is after all a profitable company with a mountain of cash of which it doesn't seem to know how to use except for doing the occasionally stock buy back for their ESOS.

Assuming major shareholder is not interested to delist, the only other way they could access and "enjoy" the cash would be to give more dividends, which CDW has been quite good at giving these past years. Probably can expect more bonus dividends if they go down this path.

Being paid to wait for delisting/takeover/bonus div is a pretty good position to be in

- still v -

Ah now I see the link. Its incredibly tiny.
Thanks!
"Not sure what you mean by needing to keep it listed to monetize holdings" - I meant that usually retired management would be much less likely to delist the company, so that they can have a way to dispose their stake or reduce their stake when they want to. How else would they monetise their stake if its private
That's the whole idea of IPOs: for some its a way to get capital to grow, but surely for some it's an exit strategy to monetise their stake. (Although you'll never hear anyone saying that in the IPO prospectus!)

[BlueKelah]

Ah now I see the link. Its incredibly tiny.
Thanks!
"Not sure what you mean by needing to keep it listed to monetize holdings" - I meant that usually retired management would be much less likely to delist the company, so that they can have a way to dispose their stake or reduce their stake when they want to. How else would they monetise their stake if its private
That's the whole idea of IPOs: for some its a way to get capital to grow, but surely for some it's an exit strategy to monetise their stake. (Although you'll never hear anyone saying that in the IPO prospectus!)

Won't it be easier to find a suitable buyer willing to pay NAV or even a premium to that if privatised?

Even if not selling after privatisation, for CDW with $61+ million net cash, if GO and delisted at 20cents, owner could then use the cash to pay for all the delisting cost easily and still have spare cash left. He could then still sit back and enjoy the spare cash and also the yearly profits the company is raking in since he is the 100% owner now.

You can't really monetize at good rate when your stock price is below NAV and daily trading volume is so low....

[GFG]

Ah now I see the link. Its incredibly tiny.
Thanks!
"Not sure what you mean by needing to keep it listed to monetize holdings" - I meant that usually retired management would be much less likely to delist the company, so that they can have a way to dispose their stake or reduce their stake when they want to. How else would they monetise their stake if its private
That's the whole idea of IPOs: for some its a way to get capital to grow, but surely for some it's an exit strategy to monetise their stake. (Although you'll never hear anyone saying that in the IPO prospectus!)

Won't it be easier to find a suitable buyer willing to pay NAV or even a premium to that if privatised?

Even if not selling after privatisation, for CDW with $61+ million net cash, if GO and delisted at 20cents, owner could then use the cash to pay for all the delisting cost easily and still have spare cash left. He could then still sit back and enjoy the spare cash and also the yearly profits the company is raking in since he is the 100% owner now.

You can't really monetize at good rate when your stock price is below NAV and daily trading volume is so low....

Yes of course I see the logic in your thinking. I think so too, but unfortunately in reality that doesnt happen.
There are quite a number of companies with share prices that are very substantially below the NAV, and many of these companies have tangible assets to back up the NAV. So why not delist them, either restructure, or even break up the company privately?
The reality is there are operational risks to doing that, not to mention delisting is not always a sure thing. It may be trading at below NAV, but when you try to delist it, the SHs want a premium suddenly, or are unwilling to sell out at below NAV.
So I dont even consider delisting as a way to realise my investment gains. (Unless I am the one doing the delisting!)
Let me give a case to illustrate this:
Lion Teck Chiang (of which i am vested)

It's NAV is something like $1.50 something. Its share price is barely half, around $0.73. It holds amongst other assets, 4 industrial freehold buildings in its book at market value.
The most recently valuation of just these 4 industrial assets (Lion Buildings) ALREADY accounts for the $0.70 plus per share you'd have to pay. In other words, if i have around $150 mil in capital (thats the approximate market cap with a premium to delist), I can delist it, sell off the 4 FH buildings (or do a sale and leaseback since their office is there) and basically get the other millions worth of assets like the steel inventory, trading business, property development business in Malaysia, Freehold 7 crescent bungalows etc in singapore... FOR FREE.

This has been the situation for years. Why doesnt the majority SH/management do that?
The reality is they want to keep it listed for various reasons, so if you're thinking there's a chance it can be delisted and you can be bought out for a premium, that's really a long shot. As a non substantial SH, even if I have 150 mil or can leverage from a bank to do a delisting, there's substantial risk involved. You'd essentially still need the existing major SHs to approve and cooperate, cos otherwise you'd be stuck with a sizable stake in a listed company with no way of delisting and with no way of executing your "break up" plan. So to rely on a 3rd party with capital to come in and do a delisting, is also going to be a long shot.

[BlueKelah]

Dun wanna lowball LTC, but div yield paltry historically and this year end no dividend, and poor earnings are not my cup of tea. Run by a Malaysian crew, track record you can see from their malaysian side LionGroup, from what I read/heard lost lots of money and now restructuring and stuff. Malaysian side also big discount to NAV for many many many many years.

Lots of hard asset is very good but if no sale or redevelopment, unlikely to generate cash flow or big jumps in NAV. Note director selling on open market..
===================================================================================================
CDW now has lotsa net cash, making money, and div yield >6%, small MOS. Very limited downside risk.

Risks include its a very small cap, run by japs, cash could be less than reported, limited growth potential, dependent on major client. (Sony has had a run of poor products past couple years but hopefully PS4 can maintain its dominance in the console space and popularity filter down to any new PS Vitas that come out.)

Privatisation or not, happy to partake for now

[sgpunter]

I highly doubt there will be a Takeover Offer anytime soon. There are too many benefits to keep CDW listed e.g. fund raising possibilities, ESOS, reputation of being listed etc etc.

That being said, I personally think that CDW at current price is a good buy as its still profitable (albeit declining revenues) and pays more than decent dividends out of its huge cash hoard. CDW has been generous in terms of dividends to shareholders for like the last 10 years at least and I really don't see this track record changing anytime.

The business segments are not entirely hopeless and there are some potential bright spots which may be catalysts for upward price movement if management is successful in securing orders. I'm also heartened that Management said that they still remain optimistic for FY2014.

In the meantime, I'll just happily collect my dividends for now.

[GFG]

I highly doubt there will be a Takeover Offer anytime soon. There are too many benefits to keep CDW listed e.g. fund raising possibilities, ESOS, reputation of being listed etc etc.

That being said, I personally think that CDW at current price is a good buy as its still profitable (albeit declining revenues) and pays more than decent dividends out of its huge cash hoard. CDW has been generous in terms of dividends to shareholders for like the last 10 years at least and I really don't see this track record changing anytime.

The business segments are not entirely hopeless and there are some potential bright spots which may be catalysts for upward price movement if management is successful in securing orders. I'm also heartened that Management said that they still remain optimistic for FY2014.

In the meantime, I'll just happily collect my dividends for now.

I'm also heartened that Management said that they still remain optimistic for FY2014

Haha, yes that statement jumped out at me too.
That's reassuring. It means that although we cant expect spectacular results, at least it puts a floor to the downside.
I think this management is reliable, expect for the $$$ transfer fiasco some years back, they have been rather frank in the AR.

[dzwm87]

Which management would say they don't remain optimistic?