AP Oil

[testwrite]

the management is known for insider trading, I definitely dont trust any management who will do insider trading. I seen more small cap in sgx with worse profit and financial asset who will pay more dividend. Zagro is one. they are paying 50% of what the company earns to the management, I dont think most public company does that

[BlueKelah]

Good set of results announced but unfortunately the improvement in earnings is not commensurate with the dividends declared. Although I wouldn't use dividends to value a company like AP Oil, the sustained low dividend payout is a poor reflection of the management's intention to reward shareholders. Nevertheless, the company did pay some dividends every year in the past few years and price now is still reasonable. Might be a long wait but rewards may be attractive too.

I did attend an AGM of apoil a few years ago and the reason given for the low payout was that it is such a small cap co, the company needs to a set a sort of 'minimum sum' aside before it can payout dividend. The smaller the co, the higher the percentage it has to set aside. SGX rule or so. Never verified this statement tho. I am OK with current management and company direction.

That's just B.S. from the management. With 31million in cash now there should be no reason to pay low div. No plan for big expansion or acquisition, cash is just being kept for the sake of being kept until company can privatise at a later stage or find some way of paying out to the directors.

Expect share buybacks and ESOS to reduce float and increase owner's share.

[specuvestor]

AFAIK there is no such minimum sum rule in SGX. The only listco require such requirements are financial companies to keep aside reserves, which includes insurers.

[secretinvestors]

Good set of results announced but unfortunately the improvement in earnings is not commensurate with the dividends declared. Although I wouldn't use dividends to value a company like AP Oil, the sustained low dividend payout is a poor reflection of the management's intention to reward shareholders. Nevertheless, the company did pay some dividends every year in the past few years and price now is still reasonable. Might be a long wait but rewards may be attractive too.

I did attend an AGM of apoil a few years ago and the reason given for the low payout was that it is such a small cap co, the company needs to a set a sort of 'minimum sum' aside before it can payout dividend. The smaller the co, the higher the percentage it has to set aside. SGX rule or so. Never verified this statement tho. I am OK with current management and company direction.

That's just B.S. from the management. With 31million in cash now there should be no reason to pay low div. No plan for big expansion or acquisition, cash is just being kept for the sake of being kept until company can privatise at a later stage or find some way of paying out to the directors.

Expect share buybacks and ESOS to reduce float and increase owner's share.

Agree with Bluekelah that there's no reason for the management to pay low dividends considering the cash they have on hand now.

Do note though, that the company did mention that part of their corporate strategy is to explore suitable opportunities in acquisitions and business alliances. Over the years, AP Oil made some acquisitions and I believe most of them are relatively profitable and contributed a decent amount to the bottom line. End 2014 they also did a minor acquisition of 60% of Heptalink Chemicals which have networks in the Asia Pacific & Middle East market. I believe the company still have room for expansion especially the franchising segment, which have seen substantial sales and profit growth in recent years.

If the cash is used for future expansion, I probably will accept the low dividend payout (albeit very unwillingly as they really have too much of that idling around currently) but to come up with a nonsensical excuse (unless this is really true and verified) about setting a minimum sum because of some rulings is really pushing it too far.

[Dividend Hermit]

Used to own some AP Oil shares as well. But the company don't really reward the shareholders. The stock will likely stay undervalued unless they increase the dividends. The cash on balance sheet is something that shareholders can see but cannot touch.

[karlmarx]

It is true that the ap oil's sharing of earnings has been less than ideal for opmi shareholders. Looking at its entire dividend history, the company has not been known to be generous to shareholders. The lack of interest in their shares reflect this.

It is also true that the company has not had this much net cash on its balance sheet before.

When I look at its financial and business aspects, I have no doubt that the company will continue to grow its earnings and assets. The price the market is offering for a slice of this company is too good a bargain to refuse.

Given its present state of gross under-valuation, i am willing to wager that at some point in the future, it's value will be unlocked; be it through special dividend, GO, share buybacks, private placements, or if shareholders are lucky, hostile takeovers.

Even if none of this happens, it's enormous cash hoard relative to market cap is not only an assurance that the company will not go belly up during the next downturn, but it is also a safety net for its share price. Barring exceptional events of course. In other words, there is a large margin of safety.

Perhaps they have a plan to invest this cash hoard, in a big way, to generate greater returns. Per haps they have yet to come to a consensus for the use of the money. Perhaps they are really unwilling to share with opmi shareholders.

Whatever it is, investors of this prude of a company can only sit on their hands.

[chew]

Clean looking balance sheet, book value (substantially backed by 30 mio odd cash) approx 45 mio after dividend payout, book value growing stably annually approx 4-5 mio / year, an argument can quite reasonably be made that it should be valued much higher than its 33 mio market cap. Like a few others in this forum, I am willing to take a bet despite management doing its seeming best to "suppress" its share price with its low dividend payout and hoarding of excess cash. The downside for me is limited, while I sit and wait for market or management to wake up.

[BlueKelah]

Clean looking balance sheet, book value (substantially backed by 30 mio odd cash) approx 45 mio after dividend payout, book value growing stably annually approx 4-5 mio / year, an argument can quite reasonably be made that it should be valued much higher than its 33 mio market cap. Like a few others in this forum, I am willing to take a bet despite management doing its seeming best to "suppress" its share price with its low dividend payout and hoarding of excess cash. The downside for me is limited, while I sit and wait for market or management to wake up.

You should consider management could very quickly "invest" the cash away and then let the price drop , then come back and delist below your purchase price.

[Nebula]

I agree with Karlmarx and Chew, based on AP's balance sheet and price, there seems to be a huge margin of safety.
i would also like to add that AP has a pretty high return on equity, 11.4% for 2014 and has been similarly high in the preceding years.
this return is inclusive of the idle cash that is sitting there.
if we assume that only 20% of the cash is used for net working capital purposes, and deduct the other 80% of the cash from the equity, a more convincing picture of AP's earning power is revealed.
based on 2014 PBT/ adjusted equity=> 5270/ 30800= 17%
in my view, AP has a margin of safety in terms of assets and earnings, management might not be the most shareholder friendly, which may warrant the huge undervaluation.

(vested)

[karlmarx]

On 5th March, a new subsidiary was incorporated in Shanghai with a paid-up capital of 1 mio rmb.

http://infopub.sgx.com/FileOpen/APOIL_AN...eID=337636

On 6th March, AP Oil International Limited became an investment holding company by transferring its primary lubricating business to its subsidiary AP Oil Pte Ltd. 10 mio sgd was also transferred to the subsidiary, with about 20 mio sgd remaining in the holding company.

http://infopub.sgx.com/FileOpen/APO%20An...eID=337789

By streamlining its corporate structure, it appears that the group may have intentions to pursue other acquisitions or growth plans.