Nam Lee Pressed Metal

[dydx]

Nam Lee has just posted its FY11 (ended 30Sep11) AR, which - esp. the Chairman's Message to Shareholders in p4/5 - makes interesting reading.....
http://info.sgx.com/listprosp.nsf/6c6be9...90023c43b/$FILE/Nam%20Lee_AR2011.pdf

Recently Nam Lee has also renewed its hitherto unused Share Buy Back Mandate for not more than 10% the issued ordinary shares, or 22,676,092 shares.....
http://info.sgx.com/listprosp.nsf/6c6be9...90023c43b/$FILE/Nam%20Lee-Letter.pdf
Bearing in mind Nam Lee has been keeping a large nett cash reserve balance (30Sep11: $19.7m), the company's BOD and management have in their disposal the required cash resources to buy back massive amount of shares from the open-market - which will have a positive impact to enhance the value of the remaining shares - if they choose or believe it is appropriate to do so.

[freedom]

if I am not wrong, Nam Lee just got a scrip dividend mandate, is it contradicting with share buyback mandate? One is to issue new share in-lieu-of dividend; the other is to buyback share from open market.

for years, Nam Lee has not bought back a single share. I don't see why they will do it now especially they just got scrip dividend mandate.

[dydx]

A Scrip Dividend Scheme and a Share Buy-Back Mandate are 2 different things.

A Scrip Dividend Scheme provides an option to all shareholders to choose between receiving their dividends in cash or in new shares, usually issued at a small discount to the prevailing market price. Such a scheme will allow those shareholders (including the controlling shareholders) who are not in need of the cash dividend and at the same time have a desire to increase their shareholding, to convert their cash dividends into new shares, and in the process raise their shareholding interests at the expense of those shareholders receiving their dividends in cash. While the new shares issued under a Scrip Dividend Scheme will raise the total number of issued shares, it may not necessarily raise the free-float or improve trading liquidity in a meaningful way.

A Share Buy-Back Mandate allows a listed company to buy back its own shares usually from the open-market when the share price is low enough. This will decrease the total number of issued shares outstanding, usually from those shares which make up the free-float. If the shares were bought back at prices lower than their corresponding NAV/share, then a Share Buy-Back Scheme will help raise both the future EPS and NAV/share of those remaining shares, thereby enhancing their intrinsic value.

In the case of Nam Lee, while the company has not bought back any of its own shares so far, the controlling shareholders - the Yong brothers - have been buying shares in the open-market to add to their shareholding. What we know from Nam Lee's latest B/S is that the company now holds a large net cash reserve, and therefore is well-placed to expand its business (including via M&A) or return any excess cash to shareholders via buying back its own shares or a special dividend.

[freedom]

I understand these are two different schemes, but from a simple point of view, through scrip dividend, the company will issue new shares; but through share buyback, the company will remove shares from the market. What if the company buys back the share from market at a higher price than it issues under scrip dividend scheme? Is it fair to all shareholders?

in terms of the controlling shareholder competing with the company for shares in the open market, I believe there is serious conflict of interest between controlling shareholders and the company, between the owners and the shareholders of the company.

[dydx]

Today (6Feb12), a record 2,163 lots were transacted mostly at $0.25, and Nam Lee closed up $0.005, at $0.255. Such a high daily volume is very unusual for Nam Lee. I guess a big minority shareholder needed money or gave up holding this illiquid counter. But more importantly, the shares have been well absorbed by willing buyers at $0.25. Some smart money at work here?

[port]

if we have $60m to buyout nam lee with a net profit of $10.9m, our ROI is an impressive 18%. at current px of 26 ct, div yield is respectable 5.77%.

18% ROI sounds too good to be true(high return=high risk or in this case, high return=low risk) or is nam lee way undervalued by the market?

[dydx]

With HDB's plan to scale up construction of new public housing flats to 25,000 units in 2012 and beyond (from 16,000 units in 2010, and 22,000 units in 2011) kicking in, I guess Nam Lee stands a good chance to increase NP in FY12 (ending 30Sep12) through FY14 (ending 30Sep14), over the NP of $10.869m recorded in FY11. A higher NP of say $12.0m in each of FY12 and FY13 will translate into an EPS of $0.052, based on the 226.761m issued shares. Against the last done share price of $0.26, this gives a forward ROI of 20% for FY12, of which approx. 6.0% will be from dividend, assuming Nam Lee would continue to pay out unchanged annual dividends of $0.015/share in FY12 and beyond.

[port]

Hi dydx & fellow forumers,

Pls correct me for any lapses as i'm not trained in accounting & finance.

if we examine the eps & retained earnings per share(REPS), dividend paid out per share(DPS) over the last 9 years,
.........eps............reps.............dps
fy11....4.78....3.28....1.5
fy10....4.36....2.86....1.5
fy09....2.02....1.02....1
fy08....3.08...2.08.....1
fy07...4.7.....3.5......1.2
fy06...2.31...1.51.....0.8
fy05....2.85...2.05....0.8
fy04....1.94....0.84....1.1
fy03.....2.......1.1......0.9
total eps: 28.04 cts
total reps:18.24 cts
total dps: 9.8 cts
div payout ratio: 34.95%

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read that a biz with durable competitive advantage can afford to hv just a small amt of retained earnings or even negative retained earnings.

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an increase in reps of 2.18cts produce an increase in eps of 2.78cts from fy03-fy11. ie during this period, every $ retained generate $1.275 of extra NP

[ngcheeki]

Nam Lee Q12012 result is out!!
http://info.sgx.com/webcoranncatth.nsf/V...0001405A4/$file/Q1Results2012.pdf?openelement

Net profit attribute to owner $3,423.00K
Net cash per share increase to $0.1427
EPS per share $0.0151
NAV per share $0.4535
Price to Book based on last closing price of $0.26 = 0.57

I'm wondering why the company still want to issue scrip dividend as the company piggy banks are expanding. Why does the company need some much cash!!

[dydx]

Based on the just announced and positive Q1 results, I guess Nam Lee is poised to raise its NP in FY12 (ending 30Sep12) over the $10.869m recorded in FY11, likely by some 20% at least, to approx. $13.0m. A NP of $13.0m will translate into a fully diluted EPS of $0.055.

It is nice to note Nam Lee's B/S, net cash reserve balance, and NAV/share have all strengthened further. It is indeed quite rare to find a manufacturer to have such a strong B/S and equity position, where its large $39.3m Trade Debtors balance is practically self-funded.

Nam Lee's last done share price at $0.26 is only 57.4% of its lastest NAV/share at $0.453! Why shouldn't Mr Market be willing to attach a higher valuation?