Pteris Global

[Zellion]

Any comment on the recent result?

[dydx]

I suppose the small loss in the recent Q3-FY10 results (released on 11Nov10) was a disappointment.....
http://info.sgx.com/webcoranncatth.nsf/V...800429D9C/$file/PGLS_2010Q3.pdf?openelement
and therefore some shareholders decided to sell, and Pteris' share price had to suffer a rather sharp mark-down from $0.225 (closing price on 11Nov10) to as low as $0.18 (intra-day low on 22Nov10).

Pteris' share price has since gone back up and today (26Nov10, Friday) closed at $0.195.

Based on the large order book of $187.0m as at 30Sep10, and the high likelihood of securing more big orders in the upcoming months (clearly mentioned in the latest outlook statement), I guess the worst has to be over for Pteris. The main problems lie with the 'lumpiness' that exist in the business, low GP margin due to competition, and forex movements, all of which will continue to exert pressure on Pteris' profitability. I suppose at a certain point, a big enough scale and with some luck, the problems can be taken care of.

[Zellion]

dydx,

Thanks for your helpful comments.
I have been following your articles (and others) closely since WallStraits time.
The worrying thing is the GP margin for Pteris. It may indicate severe competition?
I think one shareholder is accumulating this stock while one (director) is selling...

I suppose the small loss in the recent Q3-FY10 results (released on 11Nov10) was a disappointment.....
http://info.sgx.com/webcoranncatth.nsf/V...800429D9C/$file/PGLS_2010Q3.pdf?openelement
and therefore some shareholders decided to sell, and Pteris' share price had to suffer a rather sharp mark-down from $0.225 (closing price on 11Nov10) to as low as $0.18 (intra-day low on 22Nov10).

Pteris' share price has since gone back up and today (26Nov10, Friday) closed at $0.195.

Based on the large order book of $187.0m as at 30Sep10, and the high likelihood of securing more big orders in the upcoming months (clearly mentioned in the latest outlook statement), I guess the worst has to be over for Pteris. The main problems lie with the 'lumpiness' that exist in the business, low GP margin due to competition, and forex movements, all of which will continue to exert pressure on Pteris' profitability. I suppose at a certain point, a big enough scale and with some luck, the problems can be taken care of.

[dydx]

The worrying thing is the GP margin for Pteris. It may indicate severe competition?
I think one shareholder is accumulating this stock while one (director) is selling...

I am of the view that in specialist engineering and contracting businesses, the GP Margin - which, apart from the influence of COGS (MRO in Pteris' case) - is very dependent on the contracts a company manages to secure. There are always opportunities to land contracts with fat margins. While competition - especially when some of the big players do not have enough work and therefore choose to bid aggressively - will moderate or may even depress GP Margin to a very low level during certain periods, such a situation should not last forever, as in the long run, all the big players would aim for an acceptable margin and return for their business.

We have to bear in mind Pteris is already a big player - even dominating in the Asia market now - and is well placed to becoming a respectable and entrenched international player as a turnkey provider of advanced airport logistics systems and solutions. In a sense, the bigger Pteris becomes in scale, the more valuable will the business be in this specialist field, even though profitability may not be high.

The big buyer Winston Tan (an ex-director of Pteris), through his private company Winmark Investments P/L, is an experienced and skilled investor. The seller Low Kok Hua (a current non-executive director) is one of the founders; notwithstanding his recent (15Nov10) sale of 700 lots, he still holds a large 10.777% interest in Pteris.

[Zellion]

dydx,

Thanks a lot for spending your effort and time to give much insight details on the company.

I do hope that their GP margin will recover strongly. The lower GP margin projects were perhaps the projects secured during poor economy time.

The worrying thing is the GP margin for Pteris. It may indicate severe competition?
I think one shareholder is accumulating this stock while one (director) is selling...

I am of the view that in specialist engineering and contracting businesses, the GP Margin - which, apart from the influence of COGS (MRO in Pteris' case) - is very dependent on the contracts a company manages to secure. There are always opportunities to land contracts with fat margins. While competition - especially when some of the big players do not have enough work and therefore choose to bid aggressively - will moderate or may even depress GP Margin to a very low level during certain periods, such a situation should not last forever, as in the long run, all the big players would aim for an acceptable margin and return for their business.

We have to bear in mind Pteris is already a big player - even dominating in the Asia market now - and is well placed to becoming a respectable and entrenched international player as a turnkey provider of advanced airport logistics systems and solutions. In a sense, the bigger Pteris becomes in scale, the more valuable will the business be in this specialist field, even though profitability may not be high.

The big buyer Winston Tan (an ex-director of Pteris), through his private company Winmark Investments P/L, is an experienced and skilled investor. The seller Low Kok Hua (a current non-executive director) is one of the founders; notwithstanding his recent (15Nov10) sale of 700 lots, he still holds a large 10.777% interest in Pteris.

[dydx]

Today's BT report (re-produced below) entitled "Indonesia studies building new airport for Jakarta" points to another potential huge BHS contract in the future....

January 7, 2011, 6.31 pm (Singapore time)
Indonesia studies building new airport for Jakarta

JAKARTA - Indonesia's government is considering building another airport near Jakarta as the capital's main flight hub will not be able to accommodate future passenger growth in Southeast Asia's biggest economy, an official said on Friday.

The government is also looking at boosting the capacity of the Soekarno-Hatta international airport, now serving about 35 million passengers a year, said Herry Bakti, director general for air transport at the transport ministry.

He said passenger growth each year is around 15-20 per cent. Inadequate infrastructure in the country is seen as both a deterrent to foreign direct investors and an investment opportunity, with Japan already funding transport projects.

'We plan for multiple airports in the Jakarta metropolitan area,' Mr Bakti told Reuters, adding a study on the issue will be completed by the end of this year.

The government has asked the Japan International Cooperation Agency (JICA) to conduct a visibility study exploring the main airport's expansion and to develop new facilities, the Jakarta Globe newspaper on Friday quoted I Ketut Feri Utamayasa, spokesman for airport management firm PT Angkasa Pura II, as saying.

Indonesia and Japan signed a deal last month in which Japan will fund transport infrastructure projects worth 2 trillion yen (US$24 billion) around Jakarta, while other Asian nations and private equity firms are eyeing infrastructure.

Mr Bakti said the government is considering commercialising two existing airports in Jakarta, the Halim military airport and a police airport, or creating a new one in industrial areas further outside the capital, in Banten to the west on Java island or Karawang to the east. -- REUTERS

[violinist]

Another huge BHS contract?

[pianist]

i was reading the annual report and noted that pteris global net gearing has increased drastically over the years from a low of 0.4% to 33.1% in fy2010...doesnt seem a stable business to me.

[redcorolla95]

They've not been the same since 2007 when they used to be called Inter-Roller. Before that they've been growing quite nicely. Founder chairman Mr Yap Lem passed away in 2007, just before that he brought in Mr Oon Chong Howe, the current CEO, whom he had known personally for many years. Mr Oon was not from the sector then. Many people remember Mr Yap well, he was the sort of boss that would lend his own money to staff when their parents were hospitalized. So times have changed for them, and more than half of the senior management from 2006 are no longer with the company.

In business terms, previously they were able to control their costs very well - staff would do all sorts of things to be better, faster, cheaper. That's how they competed against people like Siemens. So gross & net margins have been down since then, while working capital management has been challenging, and at the same time they have been taking on lots of debt.

[dydx]

In spite a challenging operating environment - increasing MSO (materials, subcontract and other direct) and staff costs, and a weakened USD (vs. SGD) - Pteris has posted improved results in Q2 (vs. Q1-FY11).....
http://info.sgx.com/webcoranncatth.nsf/V...900391A80/$file/Announcement.pdf?openelement

Not yet a trend, but certainly a positive sign!

Pteris started to consolidate its manufacturing facilities to enhance its cost competitiveness some months back, and is now concentrating activities in its existing facilities in Suzhou and Malaysia. This is expected to increase production utilisation and operational efficiency. Pteris' latest firm order book (30Jun11: $126m) represents approx. 12 months' of work.

Meanwhile, Pteris' share price has recovered slightly from a low of $0.112 (recorded on 11Aug11) in the last few days.