Multi-Chem

[Tiggerbee]

Multichem's IT distribution arm, M Tech, is contributing 91.2% of the company's revenue in 2014, while it's PCB biz acoounts for the reamaining 8.8%.

Company is trading at about 0.58x book value based on today's stock price of 14.8c. Company paid out a total of 8.2c dividend in 2014 is expected to maintain the same dividend pay out in 2015. That works out to a dividend yield of about 5.54%. 2014 EPS was 1.34c.

NAV is 0.25c per share, based on cash and cash equivalents of 43.6M. Cash value per share is about 12.1c. Trade receivables and inventories amount to 109.5M. Trade payables and bank borrowings amount to 92.9M.

More info from Multichem and M Tech website :

http://www.multichem.com.sg/html/index.php
http://www.mtechpro.com/

Multi-Chem is a specialist drilling and routing service provider and also a distributor of specialty chemicals and materials to PCB manufacturers. In May 2002, company diversified into the business of IT distribution focusing on best-of-breed internet security, WAN optimisation, network management and video conferencing products from industry leading vendors.

Through Multi-Chem's subsidiaries under the M.Tech umbrella, the IT business has expanded in both product range and geographical coverage since inception and now spans Singapore, Australia, China (including Hong Kong), India, Indonesia, Japan, Korea, Malaysia, New Zealand, Philippines, Taiwan, Thailand and Vietnam.

Company started IT training business in Singapore in late second quarter of 2004 to complement the IT distribution business. M Tech is currently authorised to conduct training for Blue Coat, Check Point, EC-Council, HP TippingPoint, Riverbed and ISC2 courses.

Today, the Group comprises the Company, 25 subsidiaries, 2 representative offices, 3 branches, 11 offices and 2 associated companies, with a staff strength of more than 1000.

[Tiggerbee]

The Group achieved a turnover of $79.1m Q4 2014, a decrease of 3.3% or $2.7m compared to the revenue of $81.8m for Q4 2013. In 2014, the Group achieved turnover of $291.7m, a year-on-year increase of 11.0% or $29.0m, compared to revenue of $262.7m achieved in 2013. In comparison to Q3 2014, Q4 2014 revenue increased by 7.0% or $5.2m from $73.9m to $79.1m in 4Q2014. The increase in revenue in 4Q2014 was primarily due to bigger deals closed by the IT Division.

http://www.multichem.com.sg/attachment/2...717_en.pdf

For FY 2014, the IT business accounted for 91.2% of Group revenue, while the PCB business accounted for the remaining 8.8% of Group revenue.

PCB Division
Revenue in this Division increased by 38.8% or $1.9m, from $4.9m in 4Q2013 to $6.8m in 4Q2014. Comparing 4Q2014 to 3Q2014, revenue in this Division decreased by 15.0% or $1.2m from $8.0m in 3Q2014 to $6.8m in 4Q2014. The decrease is mainly due to one customer losing a contract, therefore causing a reduction in outsourcing capacity to Multi-Chem.

IT Division
The IT distribution business reported revenue of $72.3m in 4Q2014, a decrease of 6.0% or $4.6m, from $76.9m in 4Q2013. On a full year basis, this business grew by 10.4% or $25.0m, from $240.9m in 12M2013 to $265.9m in 12M2014. The growth was due to bigger deals closed and the improvement of the economy. Comparing 4Q2014 to 3Q2014, revenue increased by 9.7% or $6.4m, from $65.9m in 3Q2014 to $72.3m in 4Q2014.

[beau]

Current P/B is at 0.454, P/E at 6.936. They have consistently gave out a dividend every year. Present yield is high at 7.21%, which is not very unusual for the net-net that Multi-chem is. The high insider ownership gives me a solid peace of mind. Their CEO owns 39.81% of market cap, COO owns 28.13%. They trade at 0.64x liquidation value, which IMO is extremely rare for a consistently profitable company.

There have been insider buyback activity. Their CEO bought back S$35,860.50 worth of shares on 25th May. He also bought back S$5,920.00 worth of shares on 5th August 2014.

[BlueKelah]

sounds good so I went to have a look. On the surface most things looks good, but its lacking in one department - NET CASH.

After deducting for bank borrowings(30m), net cash is only ~8M+ which for a 41m market cap company is only about 20% of Mcap.

So in case of downside, its hard to draw a line how low it will drop. During GFC it was at 20+c.

[CityFarmer]

I have taken brief look into the stock, from the perspective of liquidation value.

IMO, we should take adjusted values, rather the face values of the current assets for the liquidation value. A back-of-envelope estimation below.

Key current assets, base on 1Q report
- cash 38 mil, no discount required
- inventories 25 mil. Since the inventories are finished good, a greater discount needed, probably 50% to about 12 mil
- receivable 79 mil. Almost all receivable are 3rd parties, we may need to discount 80%, thus 63 mil
- Total liabilities is 82 mil

Liquidation value = 38+12+63 - 82 = 31 mil, which is still lower than MC of 43 mil @$0.475

All comments are welcomed

(not vested)

[GPD]

I have taken brief look into the stock, from the perspective of liquidation value.

IMO, we should take adjusted values, rather the face values of the current assets for the liquidation value. A back-of-envelope estimation below.

Key current assets, base on 1Q report
- cash 38 mil, no discount required
- inventories 25 mil. Since the inventories are finished good, a greater discount needed, probably 50% to about 12 mil
- receivable 79 mil. Almost all receivable are 3rd parties, we may need to discount 80%, thus 63 mil
- Total liabilities is 82 mil

Liquidation value = 38+12+63 - 82 = 31 mil, which is still lower than MC of 43 mil @$0.475

All comments are welcomed

(not vested)

How do you derived at those discount %? Are there any guidances for that? thanks.

[CityFarmer]

I have taken brief look into the stock, from the perspective of liquidation value.

IMO, we should take adjusted values, rather the face values of the current assets for the liquidation value. A back-of-envelope estimation below.

Key current assets, base on 1Q report
- cash 38 mil, no discount required
- inventories 25 mil. Since the inventories are finished good, a greater discount needed, probably 50% to about 12 mil
- receivable 79 mil. Almost all receivable are 3rd parties, we may need to discount 80%, thus 63 mil
- Total liabilities is 82 mil

Liquidation value = 38+12+63 - 82 = 31 mil, which is still lower than MC of 43 mil @$0.475

All comments are welcomed

(not vested)

How do you derived at those discount %? Are there any guidances for that? thanks.

It is subjectively accessed and allocated, based on the quality of assets. We should be able to access with reasonable accuracy, with info from the company annual reports.

[kikababoo]

I have taken brief look into the stock, from the perspective of liquidation value.

IMO, we should take adjusted values, rather the face values of the current assets for the liquidation value. A back-of-envelope estimation below.

Key current assets, base on 1Q report
- cash 38 mil, no discount required
- inventories 25 mil. Since the inventories are finished good, a greater discount needed, probably 50% to about 12 mil
- receivable 79 mil. Almost all receivable are 3rd parties, we may need to discount 80%, thus 63 mil
- Total liabilities is 82 mil

Liquidation value = 38+12+63 - 82 = 31 mil, which is still lower than MC of 43 mil @$0.475

All comments are welcomed

(not vested)

How do you derived at those discount %? Are there any guidances for that? thanks.

It is subjectively accessed and allocated, based on the quality of assets. We should be able to access with reasonable accuracy, with info from the company annual reports.

I believe the greenwald value investing book used these rates too.

[Tiggerbee]

Interim dividend pay out increase from 0.27c to 1.11c as Q2 profit increased from $578k to $3.095M.

http://infopub.sgx.com/FileOpen/MCL%20Re...eID=362682

The Group achieved a turnover of $85.1m for the three months ended 30 June 2015 (“2Q2015”), an
increase of 33.4% or $21.3m compared to the revenue of $63.8m for the three months ended 30 June
2014 (“2Q2014”). For the six months ended 30 June 2015 (“1H2015”), the Group achieved turnover of
$167.2m, a year-on-year increase of 20.6% or $28.6m, compared to revenue of $138.6m achieved for the
six months ended 30 June 2014 (“1H2014”).
In comparison to the three months ended 31 March 2015 (“1Q2015”), the revenue for 2Q2015 increased
marginally by 3.8% or $3.1m from $82.0m in 1Q2015 to $85.1m in 2Q2015.
For 1H2015, the IT distribution business accounted for 92.1% of Group revenue, while the manufacturing
service and PCB-related distribution business accounted for the remaining 7.9% of Group revenue.

PCB Division
Revenue in this Division increased by 13.3% or $0.8m, from $6.0m in 2Q2014 to $6.8m in 2Q2015,
Comparing 2Q2015 to 1Q2015, revenue in this Division increased marginally by 7.9% or $0.5m from
$6.3m in 1Q2015 to $6.8m in 2Q2015 due to the increase for demand of electronic products.

IT Division
The IT distribution business achieved a quarterly revenue of $78.3m in 2Q2015, an increase of 35.5% or
$20.5m from $57.8m in 2Q2014. On a half yearly basis, this business grew by 20.8% or $26.5m, from
$127.5m in 1H2014 to $154.0m in 1H2015. The growth was mainly due to the addition of several new
products and the expansion of the regional business.

Group PAT increased by $2.2m, from a profit of $181,000 in 2Q2014 to a profit of $2.4m in 2Q2015.
Comparing 2Q2015 to 1Q2015, Group PAT increased by 60.0% from $1.5m in 1Q2015 to $2.4m in
2Q2015. This increase was in line with the increase in PBT.

[beau]

I think this is one of the best net-nets on the SGX at the moment. They continue to trade below 2/3 liquidation value despite a highly profitable Q2. Q2 profit alone is already 6% of current market cap.