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I had received a call from Ms. Law Yu Chui day before yesterday. She was kind enough to have responded to my queries on the 1Q12 results. Am posting below the gist of our discussions:
1. If this set of results is just a one-off case or is it going to be repeated.
A: In this quarter top-line went up due to good revenues from the automotive segment. However the real money is made from the HDD and precision metal stamping segments and these segments did not do too well primarily due to the Japan earthquake. However the HDD segment is now practically back to its best from this month onwards and I guess the results should start showing from the next quarterly results. The top-line growth shown by both Western Digital & Seagate also points to the same.
2. Will FY12 be better than FY11 on an overall basis (Based on the current market indications you have). The stock market has anyways given its immediate verdict with the price smashed down to S$0.22 and going further down on a daily basis.
A: No comments on this one
3. When do you plan to start the share buybacks which we had approved during the AGM. Hopefully that should provide some support to the price during this free fall.
A: The buybacks apparently have been planned using the proceeds they will get from the stake sale in Tysan Precision. The transaction will take time to be consummated considering the paperwork that needs to be done in China.
Based on all the above my gut feel is that Cheung Woh should emerge a more focused, lower debt organisation in times to come and assuming the HDD industry continues its slow climb upwards the next few years should be decent for the company.
(27-07-2011, 05:34 PM)dydx Wrote: Today (27Jul11) Cheung Woh issued an announcement with a very well written and motivated response to BT's rather sloppy report on the company yesterday (26Jul11)....
http://info.sgx.com/webcoranncatth.nsf/V...A0009F903/$file/Cheung_Woh-BT_Clarification.pdf?openelement
The young reporter Carine Lee in BT may feel a little uneasy now.
"You are right not because the world agrees or disagrees with you, rather you are right because your facts & reasoning are right."
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Published July 28, 2011
Cheung Woh clarifies move to focus on HDD
By CARINE LEE
CHEUNG Woh Technologies said that its automotive segment, while still attractive, is facing increasing challenges due to the long working capital cycle.
'This will hamper our ability to grow the business while maintaining a prudent capital structure,' it said yesterday, clarifying its move to more than halve its effective stake in Suzhou Tysan Precision Engineering to a direct holding of 33 per cent. Cheung Woh was responding to a commentary in BT ('Why would Cheung Woh put all its eggs in one basket?', July 26, 2011) asking why it was selling off control of its largest growth segment to focus on its HDD business.
'In addition to our automotive and HDD segments, we have our metal stamping segment which contributed a sizable 24.2 per cent to our profit before tax in FY2011 and has the highest margins,' Cheung Woh said, adding that HDD contributed 48.3 per cent while auto contributed 24.3 per cent. 'Of the $4.5 million increase in profit before tax in FY2011, $5.2 million and S$0.5 million were contributed by the HDD and precision metal stamping segments respectively. The increase was offset by a reduction in contribution from the automotive and re-rolling segment of $0.9 million and $0.3 million respectively,' it added.
Cheung Woh said the HDD sector has 'strong competitive advantages' and 'has high barriers to entries'. It also said that 'it is inevitable that there will be concentration risk in our HDD business'.
Responding to a query from the Singapore Exchange, Cheung Woh yesterday also recomputed its Tysan Corporation restructuring transactions to show that: the net asset value of the assets to be disposed ($12,153,000) is 11.5 per cent of the group's net asset value as at May 31, 2011 ($105,801,000); and the net profit attributable to the assets disposed ($163,000) is 4.3 per cent of the group's net profit as at May 31, 2011 ($3,806,000).
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Today was a bad day for Cheung Woh...down 13.64% to S$0.19. Was a bit puzzled at the magnitude of the fall and that too on a volume of 565 lots...not too low...Adampak was relatively stable losing just S$0.005. Am focused on both these companies cos I don't think HDD's will go out of fashion anytime soon and valuations for both are definitely very attractive...I guess the financial results of Western Digital & Seagate should be good precursors to the results of CW and Adampak. Results for Adampak are due this week...should give me a better idea of where I stand...
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I am also feArful but will start nibbling at Cheong who. Bot some at .27, averaging slowly at .22 and.19 yesterday. But still storing cash. If mr market wants to sell me cw at .10 will gladly do so.. Prob the chance to pick gd stocks on the cheap this time
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09-08-2011, 07:41 PM
(This post was last modified: 10-08-2011, 03:41 AM by RBM.)
Indeed, yesterday's closing price of S$ 0.19 appears harsh on Cheung Woh's shareholders. This share price corresponds to a historical P/E of only ~ 3.4 and a dividend yield of 7.9% (thats not a typo ........... its 7.9% based on the last FY results). All indications are that Cheung Woh's profits will be higher this full year, despite some ongoing cost niggles - and of course there is the gain arising from their recent Chinese portfolio action, which hopefully will - at least in part - see its way to shareholders as enhanced dividends and/or share buy-backs.
I note that several other smaller-cap counters have applied their buy-back mandates in the last couple of (miserable) trading days (e.g. BreadTalk). My own view is that this has helped arrest price declines. If only Cheung Woh had received their Tysan deal proceeds earlier? And, bearing in mind the current gloomy outlook, I hope their recent Chinese deal is not overly encumbered with conditions precedent (I understand it has yet to be definitively closed).
Vested. And if it stays at S$ 0.19 or less, I'll buy more.
RBM, Retired Botanic MatSalleh
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well RBM...ur wish has come true...Cheung Woh is now available at S$0.18 with no takers...have not seen the markets fall like this for a very long time...am having losses on all my purchases in recent times. Guess I should now wait and go thru the half yearly results before getting back into the markets
(09-08-2011, 07:41 PM)RBM Wrote: Indeed, yesterday's closing price of S$ 0.19 appears harsh on Cheung Woh's shareholders. This share price corresponds to a historical P/E of only ~ 3.4 and a dividend yield of 7.9% (thats not a typo ........... its 7.9% based on the last FY results). All indications are that Cheung Woh's profits will be higher this full year, despite some ongoing cost niggles - and of course there is the gain arising from their recent Chinese portfolio action, which hopefully will - at least in part - see its way to shareholders as enhanced dividends and/or share buy-backs.
I note that several other smaller-cap counters have applied their buy-back mandates in the last couple of (miserable) trading days (e.g. BreadTalk). My own view is that this has helped arrest price declines. If only Cheung Woh had received their Tysan deal proceeds earlier? And, bearing in mind the current gloomy outlook, I hope their recent Chinese deal is not overly encumbered with conditions precedent (I understand it has yet to be definitively closed).
Vested. And if it stays at S$ 0.19 or less, I'll buy more.
"You are right not because the world agrees or disagrees with you, rather you are right because your facts & reasoning are right."
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11-08-2011, 01:49 PM
(This post was last modified: 11-08-2011, 01:51 PM by RBM.)
Yes sgmystique .......... I have put a bid in for a few Cheung Woh shares earlier this afternoon .........but I do not and I would not wish Cheung Woh's current share price on anyone.
I have gone in because at the last traded price of S$ 0.17, this company is now trading on a PE ratio just above 3 and its dividend yield (based on last FY profits) is 8.7% (repeat: 8.7%). Cheung Woh is now trading at 50% of its end April levels. I believe this is a good buy.
RBM, Retired Botanic MatSalleh
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