Fu Yu Corporation

[desmondxyz]

Anyone know more about capital reduction? how does it work? Who is at the loss under capital reduction?

There are usually 3 broad reasons to do capital reduction. In Singapore IIRC it needs court approval.

1) Too much capital due to high amount of retained earnings and capital repayment do not attract tax.

This form of capital repayment actually has cashflow to the shareholders and not just purely accounting.

2) Restructuring of a weak financials by reducing capital for exisitng shareholders and most probably to increase capital soon via placement, rights debt to equity swap, etc.

3) Erase losses

This enables the company to pay dividend going forward if it starts making money instead of recouping the losses first before being able to pay out.

From Finance 101 perspective, there is little difference because it is just accounting entries from capital to accumulated losses. But practically the signaling is that management longer term view is being crystalised.

What I don't know is whether there is any tax impact if any adjustment from tax loss carried forward

FuYu seems to be doing seemingly contradictory both 1) & 3) at same time, but this is a 20 year old listco with depreciated assets.

The company itself accumulated so much loss (6 years loss for the last 10 years) and yet still can accumulate so much cash.....

[specuvestor]

^^ If you own an Asset that has zero PnL for 10 years with 10 years straight line depreciation and no maintenance capex basically gets back original cost in cash Now you own an asset and the cash.

I think FuYu capex is low past few years.

[hh488]

The company itself accumulated so much loss (6 years loss for the last 10 years) and yet still can accumulate so much cash.....
[/quote]

I thought looking at their BS, they hv retained earnings not accumulated losses. Also, have been profitable in 3 out of the last 5 yrs & NTA abt 23 cts. High cash & low debts. Should be in a sweet position.

But giving SH 0.5 ct in dividends only upon restructuring?

[specuvestor]

^^ That's why it's "seemingly contradictory" go check out their accumulated losses on a Holdco basis not on a consolidated basis. Holdco has $18m and they paying only $3.8m, it is pretty strange to me as well

[butcher]

Fu Yu and peer, Meiban used to be star performer and multi bagger ages ago but their biz no longer competitive in these days. There are much larger Chinese, Taiwanese groups

[frankblack]

Finally really moving up, but still below NTA of 23 cents.

[Townboy]

RHB Research has a buy call on Fu Yu with a target price of S$0.3. No wonder it is running so high.


- no longer vested

[Reyes]

Fu Yu Corp (FU YU SP): SGD0.16 BUY (TP: SGD0.30)

A Greatly Undervalued Turnaround Jewel

We initiate coverage on precision tooling, precision injection moulding and assembly firm Fu Yu with a BUY and a DCF-derived SGD0.30 TP (88% upside). At 1.7x FY15F ex-cash P/E, we believe the stock, which has a high +7% potential maiden dividend yield, is trading at undemanding valuations. With gross margins expected to improve significantly from cost-cutting and restructuring initiatives, we anticipate it to chart a record FY15.
A robust FY15 ahead

[SLC81]

This is the one of the last few with very good upside potential. Plastic industry is finally turning around.
Q2 result is to be released soon and with some measures to cut costs there could be very good surprise on the upside

Hmm had a good laugh looking back at the time when i "promoted" that FUYU is a good buy at 0.072 but not many care to dig further. its now 172% up.

[Big Toe]

My 2 cents.

1. On a long term basis, their current business(as is) is mediocre at best. No sustainable competitive advantage from what I know.
2. Multiple favorable factors this year. Plenty of tailwind to give them the much needed boost.
3. Share price beaten down so badly in the past years that the improvements this year will be magnified many fold.
4. Looks attractive for the short to mid term. Long term, there are better businesses out there.
5. There is probably money to be made from the turn around. A terrible company getting back to become a mediocre company can be very very profitable for the investor.