XMH Holdings

[CityFarmer]

XMH Holdings Ltd is engaged in distribution and provision of value-added products and services and after sales services, trading and others. It has two segments: distribution, which is relates to distribution of propulsion engines, and sales service, which is relates to after sales services provided, which includes sales of spare parts and trading of used engines. Its primary business involves the distribution of high-speed marine engines, medium-speed marine engines, power generating sets, industrial diesel engines, related components, and the provision of related value-added products and services, which includes customized solutions, such as e-Gen and XMH IPS. Its customers for marine products include vessel owners, shipyards, dealers and its customers for its industrial products include hotel proprietors, mine owners and dealers.

High gross and net profit margin, with ROA/ROE of 13%/27%.

PE is approx 8, and PB of 1.7

Anyone has any view on this company?

[smallcaps]

27% seems too high... any plausible reason for it? Otherwise, might be prudent to treat it like a normal company and hence PB 1.7 would be too high, especially since a large part of its capital is newly injected.

[CityFarmer]

27% seems too high... any plausible reason for it? Otherwise, might be prudent to treat it like a normal company and hence PB 1.7 would be too high, especially since a large part of its capital is newly injected.

The company is new to me, it attract my attention during one of my regular search.

It is providing service in a highly professional and niche market, 27% in ROE with no debt is remarkable, but it is definitely not absurd or impossible.

It is newly listed on the Main Board of the SGX-ST, on 26 January 2011, but with years of operating history before then

FY2012 dividend yield is more than 5%

One point to note is revenue is declining in the last 3 years, mainly on distribution biz. Gross profit margin is also declining, similar trend observed on net profit margin.

The company biz is not within my domain of competency, but never too late to acquire more knowledge.

[smallcaps]

This is extracted from the front page of the prospectus which might explain the higher than usual ROE:

We would like to draw the attention of all potential investors to the risk factor
entitled “We are dependent on our exclusive distributorship arrangement with
MHIESA to distribute a limited range of Mitsubishi brand of high-speed and
medium-speed marine diesel engines and products in Singapore, Indonesia
and the Maldives, which accounted for a significant portion of our revenue”.
Please refer to the section entitled “Business Overview” of this Prospectus
for the models of high-speed and medium-speed Mitsubishi marine diesel
engines that we distribute. In particular, potential investors should note that
our purchases of Mitsubishi brand of products represent approximately 72.0%,
82.5% and 77.8% of our total purchases for each of FY2008, FY2009 and
FY2010 respectively. The sales of Mitsubishi brand of high-speed and mediumspeed
marine diesel engines and products that we distribute accounted for a
significant portion of our Group’s revenue for FY2008, FY2009 and FY2010.
There is no assurance that our exclusive distributorship arrangement with
MHIESA will continue indefinitely. The termination of or non-renewal of our
exclusive distributorship arrangement with MHIESA, or the renewal of our
existing exclusive distributorship arrangement at less favourable terms with
MHIESA, would have a material adverse effect on our business and financial
performance and position. Please refer to the section entitled “Risk Factors”
of this Prospectus for further details.

[Ben]

I did not go into the financials details of XMH but I am not too positive about the prospect of this company. The industry is not small but dominated by a few giants: the two big guns are Caterpillar and Cummins, and they have extensive distribution channels in Asia. These two fortune 500 company has long presence in this part of the world for them to build up a solid relationship with most of the shipyards/ship owners, and it is hard to break this relationship. Beside these two, XMH also need to complete with other sizeable engines company, such as MTU and Wai Chai, who are aggressively trying to muscle their ways into the market by offering very competitive pricing.

The biggest disadvantage I can see in XMH is that they are just a distributor of engines while the others big boys mentioned above are engine manufacture and distributors in one. In this way, XMH can never represent and sell their engines, which are considered premium brand in the markets. Look at the brands XMH is representing; they are mainly Japanese and Korean brand engines, fighting against the US and European brand. Which is more premium is obvious. To sell these Japanese and Korean engines, XMH probably have to compete on price, which means lower margins.

Also, as a distributor, there is no guarantee that your principal will renew your distributorship forever. XMH sells a lot on Mitsubishi engine, but XMH is NOT only selling Mitsubishi engine. At some point in time in the future, Mitsubishi may want exclusivity, and they may decide to change distributor who is willing to just concentrate on selling their products, or to do it on its own. Such event may be remote, but not impossible. But well, it could be that Mitsubishi may one day decide to acquire XMH and pay a high premium for it…possible also.

XMH derives its revenue mainly from the marine market in Indonesia and Indonesia offers huge potential, especially marine market. The country needs tugs and tows boats to support the booming mining activities. XMH is able to supply engines for these tugs and tows boat. But marine business is really cyclical and volatile. The recovery since 2008 GFC is slow, painful and uneven. The near term outlook is also unclear. Doing business in Indonesia is very different from Singapore. Relationship is important, and who you know is crucial. I do know that the big guns are appointing local company as distributors and dealers. It is easier for the local people to talk to each other. I am not sure what XMH strategy is.

So overall, my take on XMH is a little pessimistic. I think this will just be an average company at best.
But this is just my personal views based on my limited knowledge. As said in the beginning, I didn’t go into the details of XMH, and my perspective could be completely incorrect, as it has happens many times before. Please feel free to challenge my views.

[CityFarmer]

Thanks Smallcaps and Ben inputs.

After more in depth of my study into XMH, exclusive distributorships seem a norm, rather than exception in XMH biz. I do not know the industrial well, i am not sure it is a strength or weakness? Can it a industrial norm? Some of the exclusive distributorship dated back to 1990s.

XHM distributes many brands i.e. Mitsubishi, Akasaka, Hyundai, Doosan, SOLÉ and etc. It also distributes their own brand i.e. e-Gen. i am not sure it's popularity, but assume it is at its infancy vs other major brands

XHM also expending into Vietnam and India, although it is still too early to conclude the outcome. I agree that the main contributor still comes from Indonesia, at least in near future

I will put XHM into my watch-list

(not vested)

[shn]

This one has reached new height! Congrats to those who own it.

Strong top line and bottom line growth and strong balance sheet. There is room for it to go higher.

Nextinsight has an article on it.
http://www.nextinsight.net/index.php/com...s-analysts

(Vested)

[wahkao]

XMH Holdings Ltd.
No. 44 Sungei Kadut Avenue
Singapore 729667
Tel: (65) 6368 0188 Fax: (65) 6368 0633
Website: www.xmh.com.sg
CO. REG. NO.: 201010562M
1
XMH to expand products and services
offering with the acquisition of MechPower Generator Group for approximately
S$17.4 million
 Boasting a history of about 30 years, the target company is engaged in the
manufacturing, assembly, sale and servicing of diesel powered generator sets
and has operations based in Singapore and Malaysia
 The acquisition will be synergistic to XMH’s existing operations and would also
help to grow more in the non-marine sector applications
 This is the first major M&A for XMH since building a war chest of cash at its IPO
and after investment by Credence Capital
Singapore, 7 September 2013 – XMH Holdings Ltd., (“XMH”, “新明华控股” or the “Group”), a
diesel engine, propulsion and power generating solution provider in the marine and industrial
sectors, is pleased to announce today that the Group has entered into a sale and purchase
agreement (“SPA”) with Mech-Power Generator Pte Ltd (“MPG”), the latter’s owners namely, Mr.
Loke Choon Hoe and Mdm. Tham Sow Lin to acquire MPG.
FOR IMMEDIATE RELEASE
XMH Holdings Ltd.
No. 44 Sungei Kadut Avenue
Singapore 729667
Tel: (65) 6368 0188 Fax: (65) 6368 0633
Website: www.xmh.com.sg
CO. REG. NO.: 201010562M
2
The MPG Group commenced business almost 30 years ago and is engaged in the manufacturing,
assembly, sale and servicing of diesel powered generator sets. The MPG Group supplies a wide
range of generator sets with power ratings (or capacity) from 20 kilovolt -ampere (kVA) to 2,500 kVA.
MPG’s generator sets are manufactured and assembled using, amongst others, reputable engines
brands such as Mitsubishi, Man, Perkins, Volvo Penta, MTU and alternators such as Leroy Somer,
Stamford, Mecc Alte, AVK, Marelli.
The MPG Group’s generator sets are generally used in industrial, commercial, marine and military
applications and are supplied to shipyards and ports, buildings, hospitals, education centres, data
centres, airports, hotels and resorts infrastructural projects (roads, bridges, underground tunnels,
waste treatment plants etc.) as well as plants and factories worldwide.
The MPG Group also fabricates, manufactures and customises all supporting equipment such as
acoustic silencer and attenuators, bulk fuel tank, auto/manual-synchronising switchboards,
weather-proof and sound-proof canopies/enclosures, loadbanks, generator control panels and base
skids/fuel tanks.
MPG manufactures and assembles its generator sets in its approximately 1.4 hectares Malaysian
plant located in Iskandar Malaysia in Kulaijaya, Johor.
Rationale for the acquisition
The acquisition will allow XMH to tap on MPG Group’s existing customer base as well as gradually
implement the technical knowledge and capabilities of MPG Group into XMH. The acquired
knowledge will then in turn, provide XMH with a solid platform to expand on its range of products
and services.
XMH Holdings Ltd.
No. 44 Sungei Kadut Avenue
Singapore 729667
Tel: (65) 6368 0188 Fax: (65) 6368 0633
Website: www.xmh.com.sg
CO. REG. NO.: 201010562M
3
Speaking on the acquisition of MPG Group, Mr. Elvin Tan Tin Yeow, the Chairman and CEO of XMH,
commented, “We believe that this is a very positive move as the experience and expertise of the
MPG Group in the industry for approximately 30 years will be passed on to XMH and when fully
integrated into XMH, this will allow us to increase our products and service offerings and expand
our customer base. We are confident that with the acquisition, we can achieve better operational
synergies and we can enhance our generator set assembly capabilities to gain more
competitiveness in the market.
The acquisition of the MPG Group will also provide XMH with a very good opportunity to acquire a
profitable entity and it will be earnings accretive and giving us significant opportunities for
growth.”
The acquisition also bodes well for XMH’s diversification strategy as it will allow the Group to
expand its core businesses and its offering of power generating sets will increase to include large
customised solutions, especially for non-marine sector applications.
Consideration for the acquisition
Under the SPA, the acquisition consideration of approximately S$17.4 million will be paid in two
equal tranches of about S$8.7 million each. Part of the sum will be satisfied using internal resources
which may include the proceeds of the initial public offering whilst the other part through issuance
of new shares of XMH.
There are also profit warranty and NTA warranty provided under the SPA. Under the warranties, the
aggregate audited consolidated net profit after tax excluding extraordinary gains of the MPG Group
for both FY2014 and FY2015 shall not be less than S$6.9 million and the audited consolidated NTA of
the MPG Group shall not be less than S$4.5 million as at balance sheet date as shown in the FY2013
accounts of the MPG Group.
--- The End---
XMH Holdings Ltd.
No. 44 Sungei Kadut Avenue
Singapore 729667
Tel: (65) 6368 0188 Fax: (65) 6368 0633
Website: www.xmh.com.sg
CO. REG. NO.: 201010562M
4
ABOUT XMH HOLDINGS LTD (Bloomberg Ticker: XMH SP)
XMH Holdings Ltd is a diesel engine, propulsion and power generating solutions provider in the marine and industrial
sectors. The Group’s business activities may be broadly categorised into the following: (i) distribution and provision of
value-added products and services; and (ii) after-sales services, trading and others. The Group’s marine products are
marketed to shipyards, vessel owners and dealers whilst its industrial products are distributed to hotel proprietors,
building owners and main contractors for a wide range of applications.
The Group has been granted distributorship, agency or dealership rights from reputable brands such as Mitsubishi ,
Akasaka and Kamome (Japan), Hyundai, D-I and Doosan (South Korea), SOLÉ, Korsør, Reintjes, Scania, CENTA (Europe),
GDF (PRC China) and Mentrade (Singapore) to distribute and sell a large variety of products which include marine and
industrial engines, power generating sets and related components.
The Group also leverages on its technical know-how and wide product range of marine and industrial diesel engines,
power generating sets, genuine spare parts and related components to provide value -added products and solutions
which include “ACEGEN”, its in-house range of power generating sets and “XMH IPS”, a one-stop integrated solution to
vessel owners requiring diesel engine (or electricity) driven propeller-based propulsion systems to power its vessels.
For more information please visit www.xmh.com.sg.
_____________________________________________________________________________
Issued for and on behalf of XMH Holdings Ltd.
By Financial PR Pte Ltd
For more information please contact:
Romil SINGH / Jonathan THEO
Financial PR Pte Ltd
Tel: 6438 2990 / Fax: 6438 0064
E-mail: romil@financialpr.com.sg, jonathan@financialpr.com.sg

[wahkao]

they paid 11.6million of goodwill to acquire mechpower.
So that means they paid 11.6M in premiums over the book value of mech power.

dont really like the acquisition.....

[Image: suUKuYR.png]

[yawnyawn]

they paid 11.6million of goodwill to acquire mechpower.
So that means they paid 11.6M in premiums over the book value of mech power.

dont really like the acquisition.....

[Image: suUKuYR.png]

http://infopub.sgx.com/FileOpen/XMH_Pres...eID=255582

Under the SPA, the acquisition consideration of approximately S$17.4 million will be paid in two equal tranches of about S$8.7 million each. Part of the sum will be satisfied using internal resources which may include the proceeds of the initial public offering whilst the other part through issuance of new shares of XMH.

There are also profit warranty and NTA warranty provided under the SPA. Under the warranties, the aggregate audited consolidated net profit after tax excluding extraordinary gains of the MPG Group for both FY2014 and FY2015 shall not be less than S$6.9 million and the audited consolidated NTA of the MPG Group shall not be less than S$4.5 million as at balance sheet date as shown in the FY2013 accounts of the MPG Group.

So there is a profit warranty for FY14 and FY15 to be >6.9m in total. XMH is paying 5x earnings for the new business which I think is reasonable and doesn't look like a bad business to acquire.

Their revenue from the distribution and after-sales business is decreasing which is why I understand that they are buying new businesses to make up for the fall in revenue.

(Not vested)