Tai Sin

[dzwm87]

Look at comparable peers. You are only looking at cash which can be quite on the extreme. That's unless you're looking for net-net stocks; of which it is another ball-game.

There are still other non-cash working capital such as receivables and inventories. Of course, the next level will be for the investor to determine how much of these can be converted to cash to pay off the current liabilities.

[l0nEr]

Earnings is out... but not sure how to look at it? Any comments?
http://info.sgx.com/webcoranncatth.nsf/V...0002EF132/$file/Q1_ANNOUNCE_SepFY2013.pdf?openelement


Q1 Revenue up 8.6% y/y
Q1 profit up 26% y/y

[Bibi]

I would think not too bad.
Gross margin improved to 19.0% compared to 17.27 and 18.31 (full year)
Net margin improved to 6.53% compared to 5.62 and 5.45 (full year).

Both metrics still a far cry compared to 2007 (25.76% and 9.0%) though.

[Ben]

Overall Q1 result is positive, though there are some areas of concern too.

Concerns
Cable and wire segment, the bulk of the company business, is slowing down. Sales dropped by 5% compared to Q1’12, and if compared to Q4’12, the reduction is even more significant. The reason given is because of a drop in copper prices, and not quantity, which I take it to mean that demand for wire and cable is still robust.

Cast lab contributed $6.98 million of revenue in the quarter. Take note that Cast Lab was acquired on 31 Jan’ 12, and contributed $4.92M in Q3’12 and $8.01M in Q4’12, the latest quarter is showing a sequential drop in revenue. As we don’t have a long history to benchmark this quarter performance, I am reserving my comments for now and let’s see following quarters performance. However, in term of contribution to profit, this segment only contributed a mere 1% GM in FY2012. I hope Tai Sin’s management can implement some costs saving initiative in Cast Lab and improve its contributions, just like the way they run Tai Sin.

Significant reduction in profit from associate, no reason given for the drop.

Positives
Revenue stays above $70M, while lower than Q4’12, it is still higher than all the other quarters in FY10, FY11 and FY12. EMD, the second largest segment, is still showing good growth.

GM% of 19% in this quarter is impressive and higher than the average recorded for the last three FY. Given the fact that copper price has dropped, and we can assume that Tai Sin has to lower their selling price for their wires and cables, some other segments must have recorded quite significant improvement in margin. These could be from EMD or switchboards, or even from Test & Inspection. This is good news as the company is not so dependent on C&W.

Likewise, PBT % is better than the average recorded for the last three FY. This is due to stringent cost management, which we all know the Lim’s family are famous for.

EPS for this quarter is 1.1 cents, and FY13 EPS could well surplus last year 4.47 cents. It is reasonable to expect a dividend payout not less than last year, which means yield at current price is still very attractive at ~ 9%.

NAV improved to 29.69 cents versus current XD market price of about 23 cents.

Outlook
The many industrial and infrastructure projects in Singapore is positive for the company. Lately LTA has announced plan to recable MRT’s cable, I am not sure if TS can benefits from this project.

Company talks about EMD development, which could be a further catalyst moving forward.

Cast Lab performance could be a wild card too.

[Caelitus]

Under the Scrip Dividend Scheme, new shares will be issued at S$0.21 and credited to Securities Account on 24 Dec 12.

[paullow]

price looks on uptrend. those who subscribed to the scrip at 21c stand to gain. there may be a bit of selling pressure once new shares start trading on 24dec.

[dzwm87]

Some views on this company:

- Will continue to be driven by its concentration in the Copper & Wire (C&W) business, followed by electrical material distribution. C&W takes up around 60% of sales but accounts for 75% of EBIT. EMD has 35% of sales while attributing 25% of EBIT. This means its other businesses are essentially useless on a profit perspective and we can see it so as its loss-making lamp business eats up the profits from the other segment.

- It seem like the mgmt is trying hard to diversify but has failed to make a good shift away from the highly competitive C&W industry. Bear in mind that the mgmt team disclosed in its prospectus that barriers to entry is in fact low and the start up cost is low at around S$1mln if I remembered correctly. They prided that barriers come in the form of good customer relationship. IMO, I see it as a weak bargaining power and this is evident from is working capital management. they take close to 100 days to collect their A/R while they have to pay their suppliers within 40 days. Inventory turnover of another 100 days mean CCC days is almost close to 6 months!

- Will be depending a lot on Singapore construction market as it contributed close to 75% of sales. Tai Sin has recovered tremendously for the past two FYs and this is largely due to a growing construction demand. According to BCA, CY2010 & CY2011 seen a +22% and +16% in construction demand. Yet, BCA is expecting a drop in demand for CY2012 of around -25% (before being flattish for CY2013 & CY2014). Aligning to the macro trend, we are also seeing a weakening in growth for its C&W business since 3QFY12 (or 1QCY12) with 3MFY13 recording a decline of -5%. Tai Sin doesn't disclose much quarterly breakdown but it seem like there is some cooling down effect.

- Biggest positive is in its dividend payment + they have been paying dividend consistently since FY02. Cash flow isn't that fantastic as well. Earning quality of its CFO isn't that good to the extent of above 1x PAT. Best year was 2009 but that was because working capital decrease by S$40mln. CAPEX barely supports depreciation charges which means most of the CAPEX is on maintenance.

- Lastly, another key attraction is its valuation of less than 6x TTM P/E. So despite Tai Sin being an average business, its valuation makes it look cheap! In 2010, it was trading close to 12x P/E - when things were bullish and before the US downgrade + euro crisis. If somehow, the dividend yield can be sustainable and earnings do not get a big downside surprise then I believe there is potential in its upside for capital gain.

Interested to hear what others think.

(not vested)

[cif5000]

Some views on this company:

- Will continue to be driven by its concentration in the Copper & Wire (C&W) business, followed by electrical material distribution. C&W takes up around 60% of sales but accounts for 75% of EBIT. EMD has 35% of sales while attributing 25% of EBIT. This means its other businesses are essentially useless on a profit perspective and we can see it so as its loss-making lamp business eats up the profits from the other segment.

- It seem like the mgmt is trying hard to diversify but has failed to make a good shift away from the highly competitive C&W industry. Bear in mind that the mgmt team disclosed in its prospectus that barriers to entry is in fact low and the start up cost is low at around S$1mln if I remembered correctly. They prided that barriers come in the form of good customer relationship. IMO, I see it as a weak bargaining power and this is evident from is working capital management. they take close to 100 days to collect their A/R while they have to pay their suppliers within 40 days. Inventory turnover of another 100 days mean CCC days is almost close to 6 months!

- Will be depending a lot on Singapore construction market as it contributed close to 75% of sales. Tai Sin has recovered tremendously for the past two FYs and this is largely due to a growing construction demand. According to BCA, CY2010 & CY2011 seen a +22% and +16% in construction demand. Yet, BCA is expecting a drop in demand for CY2012 of around -25% (before being flattish for CY2013 & CY2014). Aligning to the macro trend, we are also seeing a weakening in growth for its C&W business since 3QFY12 (or 1QCY12) with 3MFY13 recording a decline of -5%. Tai Sin doesn't disclose much quarterly breakdown but it seem like there is some cooling down effect.

- Biggest positive is in its dividend payment + they have been paying dividend consistently since FY02. Cash flow isn't that fantastic as well. Earning quality of its CFO isn't that good to the extent of above 1x PAT. Best year was 2009 but that was because working capital decrease by S$40mln. CAPEX barely supports depreciation charges which means most of the CAPEX is on maintenance.

- Lastly, another key attraction is its valuation of less than 6x TTM P/E. So despite Tai Sin being an average business, its valuation makes it look cheap! In 2010, it was trading close to 12x P/E - when things were bullish and before the US downgrade + euro crisis. If somehow, the dividend yield can be sustainable and earnings do not get a big downside surprise then I believe there is potential in its upside for capital gain.

Interested to hear what others think.

(not vested)

Trying to keep to your points but I think my notes are all jumbled up.

- Had cut loss on the lamp business.

- The number of players in CW in SG has remained relatively unchanged over the years. Only a handful of them left. They know one another and as long as they are not stupid enough to charge below cost, all should stay profitable. The costs are also very transparent. Copper price fluctuation is the biggest risk but I don't remember a loss-making year for TS CW segment. Capital investment of as little as $1m but you already found out that the working capital is much more. Anyone who enters with, let's say, $10m, will lose money. Margin is thin and a small/new player will not be able to generate a volume enough to undercut the competition. The existing players have depreciated, but good working condition, equipment. (OT: If they did an Olam, their book values will be substantially higher.)

- The construction boom is just a small bonus but only if they work harder - higher volume lower margins. Think of the business as a cash cow. How is it going to lose money when everyone does cost-plus pricing? The industry is so lousy that it repels new entrants. Which manufacturing company runs on a 1% CAPEX? Venture Corp? Before the construction boom, they were making easier money. The copper price hike made them richer. All these are bonuses.

- Operating cash flow is just a function of the business volume - whether it is expanding or contracting. Don't over analyse it.

- Business hasn't changed but the stock was priced around 16ct just 12 months ago. It's up by about 50% excluding dividends. There is always the likelihood of it retracing to its recent low again. Think of the downside as well.

[paullow]

wat cfi5000 said is quite true. but i want to add that taisin is still growing and the nav and market cap has grown 6-8% pa. and is still growing.so for it to retrace back to 16c will need quite a severe global impact or slowdown. i would think any price near 20c if ever it drops is good to enter. the power of this stock of such high dividend is to reinvest dividends n subcrib to any scrip dividend. doing that at entry price of pb<0.7 or less will grow money quite rapidly.
vested+++

[Ben]

It is now trading at 0.265, up 6% and inching closer to its NAV of 29c.