Casa Holdings

[dydx]

They have done well in the past 4 years, any idea why Casa was losing money between 2002 to 2006?

I don't know about Casa's distant past before FY2004, but the FY06 AR described the losses in FY06 and FY05.....
http://info.sgx.com/listprosp.nsf/07aed3...2002e08d2/$FILE/CASA%20AR2006_SGX.pdf

Essentially, Casa was the local distributor of the Korean "LG" brand products before, but in Feb05 LG apparently terminated the distributorship unilaterally. This had led to a big/sharp fall in Casa's Trading revenue in FY06, and a total settlement payment from LG to Casa of $6.4m - $4.9m received in H1-FY05, and $1.5m in FY07.....
http://info.sgx.com/webcorannc.nsf/Annou...endocument

Casa's large losses in FY05 and FY06 were mainly attributed to its previous PRC-based Manufacturing Div. - essentially the 60%-owned subsidiary Changzhou CASA-Shinco Electrical Appliance Co Ltd, engaged in the manufacture/sale of home appliances mainly front-loading washing machines - which recorded operating losses of $11.4m (inclusive of $6.8m in provisions related to fixed assets) in FY05, and $5.1m (inclusive of $1.0m in provisions related to fixed assets) in FY06. Casa and its j-v partner Shinco eventually sold this loss-making business to Ardutch BV/Arcelik Group (based in Turkey) for RMB60.0m (Casa's share: Rmb36.0m, or $7.39m) in Sep07.....
http://info.sgx.com/webcoranncatth.nsf/V...900220E11/$file/Casa.Holdings.Disposal.of.Investment.pdf?openelement
While in FY07 Casa booked a $7.25m gain (against the written down BV of its 60% stake in and assets of Changzhou CASA-Shinco Electrical Appliance Co Ltd) from the disposal, this investment had incurred and caused Casa approx. $21.0m in total losses since its inception till Sep07.

In addition, in FY05 Casa also took a $6.8m provision on impairment loss on its previous 29.4% (since reduced to 27.39%) stake in Fiamma Holdings Bhd, possibly due to the fall of its share price in 2004/5.

I guess there is enough evidence that since FY07, the Trading/Distribution businesses and financial strength in both Casa and Fiamma have improved by quite a lot.

Fiamma's FY10 AR.....
http://announcements.bursamalaysia.com/E...600306aee/$FILE/FIAMMA-AnnualReport2010%20(2.1MB).pdf

[Thriftville]

Hey dydx, thanks a lot for your reply on Casa's historical result.
From the figures so far, Casa price looks good. I've a concern about the management. Do you think they are reputable and possess the integrity to manage the business well in the long run?

[dydx]

I've a concern about the management. Do you think they are reputable and possess the integrity to manage the business well in the long run?

I think it is best that you make your own assessemnt and judgement on Casa's management. I suppose you can read the past AR's to have a feel on their abilities and track record, including solving the problems encountered in the business and the company meeting its obligations. You can also do a market check on their reputation by talking to Casa's customers. Or you may pay a visit to Casa and have a chat with the CEO or CFO.

[Thriftville]

I've a concern about the management. Do you think they are reputable and possess the integrity to manage the business well in the long run?

I think it is best that you make your own assessemnt and judgement on Casa's management. I suppose you can read the past AR's to have a feel on their abilities and track record, including solving the problems encountered in the business and the company meeting its obligations. You can also do a market check on their reputation by talking to Casa's customers. Or you may pay a visit to Casa and have a chat with the CEO or CFO.

Great! Thanks dydx for the suggestions. Would the CEO be willing to entertain retail investors?

[dydx]

Casa's 27.39%-owned (32.301m shares) listed Malaysian associate Fiamma Holdings Bhd posted a set of highly commendable Q3 (ended 30Jun11) results recently.....
http://announcements.bursamalaysia.com/E...enDocument

More info on FHB from its FY10 AR.....
http://announcements.bursamalaysia.com/E...600306aee/$FILE/FIAMMA-AnnualReport2010%20(2.1MB).pdf

As FHB is poised to post record full-year profits for FY11 (ending 30Sep11), Casa should benefit from equity accounting its share of FHB's NP and hopefully also a higher Final dividend payout (last FY10: MYR0.055/share; amounting to approx. $710k).

Based on Casa's also highly commendable 1H (ended 31Mar11) results.....
http://info.sgx.com/webcoranncatth.nsf/V...C002E41EB/$file/Result.Annoucement.March.2011.final.pdf?openelement
I guess it is also reasonable to expect the company to post at least a decent increase in NP in the FY11 (ending 30Sep11) full-year results due by end-Nov. Is it reasonable to also expect a higher FY11 Final dividend (last FY10: $0.01/share)?

[dydx]

Casa's FY11 (ended 30Sep11) full-year results just out.....
http://info.sgx.com/webcoranncatth.nsf/V...7002BFE7A/$file/Casa.Full.Year.Results.30.09.11.pdf?openelement

The overall group results are solid, mainly because of:
(1) Steady/growing sales and profitability of the Singapore-based Trading division, which is underpinned by (i) still growing demand for home appliances; (ii) Casa's wide range of products, supported by established distribution channels and effective marketing effort; and (iii) continued strength of the SGD vs. USD (and to a lesser extent, EUR). Going forward, the large number of private condo projects and the massive HDB building programme presently underway should provide a solid base for this business in the next 3 years at least, as more new condo and HDB flats are completed and delivered to the buyers.

(2) Increasing profit contribution and dividend income from 27.39%-owned associate Fiamma Holdings Bhd (listed on Bursa), which has also released a set of solid FY11 (ended 30Sep111) results recently.....
http://announcements.bursamalaysia.com/E...200398B5A/$File/FHB%20Q4%202011%20(A).pdf
Based on higher MYR0.07/share (FY10: MYR0.055/share) Final dividend proposed, Casa should be receiving close to $1.0m (vs. $780k in FY11) in dividends from Fiamma in due course.

Casa's B/S as at 30Sep11 is substantially stronger than a year ago.

An unchanged Final dividend of $0.01/share declared. Great!

[dydx]

I wonder whether the lastest residential property demand cooling measures from the government would hurt Casa's business volume and profitability in a big way going forward. After some thoughts, my own conclusion is unlikely. Why? Because Casa's range of home appliances (mainly diffrerent ranges of mid-price imported cookers, cooker hoods, fridges, freezers, water heaters and, to a smaller extent, washing machines and dryers, etc.) are mostly targeted at HDB new flats, new condo projects targeted at the masses, and the general replacement market. So based on the massive number of newbuildings underway, overall demand from these segments should be sustainable in the next 3 years.

Based Casa's FY11 EPS of $0.0324, assuming profit contribution from the 27.39%-owned associate Fiamma Holdings Bhd just stays at the same level, we are talking about Casa deing able to deliver a total EPS of close to $0.10 in the next 3 FYs. From this, we can expect a total dividend payout of $0.03, assuming Casa just keeps the yearly dividend payout at $0.01.

Based on the last done share price of $0.12, a total EPS of $0.10 over the next 3 FYs will translate into a total potential gain of 83.3% (or 27.8% annualized), of which 25% (or 8.3% anualized) would be in the form of dividends. Going into this 3-year investment journey, based on Casa's 30Sep11 NAV/share at $0.2189 (of which over $0.04 is represented by net cash), we also have the comfort of solid asset-backing. The coming $0.01/share Final dividend for FY11 itself is already bringing a 8.3% gain more or less upfront.

[dydx]

The just released FY11 AR makes interesting reading.....
http://info.sgx.com/listprosp.nsf/6c6be9...200292eae/$FILE/CASA%20AR%202011%20SGX.pdf

Now I look forward to the $0.01/share Final dividend, which should be paid in the later part of Feb.

[dydx]

Casa's 27.39% interest in Fiamma Holdings Bhd (listed on Bursa Malaysia) is represented by (1) 32,301,000 Fiamma shares, and (2) 14,356,000 Fiamma warrants (expiry: 26Nov18) convertible into new Fiamma at MYR1.00/warrant. Based on the last done price of Fiamma share at MYR1.18, and assuming a derived fair market price of MYR0.18 for each Fiamma warrant - i.e. at par, without any premium/discount - the derived total MV for (1) and (2) is MYR40.699m, or approx. $16.7m (based on the exchange rate of MYR/SGD: 0.41).

Based on the last done price of $0.128 and the 209.826m outstanding issued shares, Casa's latest market cap. stands at $26.86m, which is represented by (i) Casa's main profitable and Singapore-based operating business, (ii) Casa's growing nett cash reserve of $7.03m (as at 30Sep11), and (iii) the 27.39% investment interest in Fiamma, which has its own profitable and growing business based in Malaysia, and a current MV of $16.7m.

If we deduct (ii) and (iii) above from Casa's latest market cap. of $26.826m, Mr Market is now attaching a value of only approx. $3.1m on Casa's main profitable and Singapore-based operating business under (i). This can't be right!

[dydx]

Today (16Jan12), Casa closed up $0.012 (or 9.4%) at $0.14, giving a higher market cap. of $29.38m, vs. NAV (as at 30Sep11) of $45.94m or $0.219/share.

Based on Fiamma's latest (30Sep11) equity position of MYR231.538m (equivalent to approx. $94.93m).....
http://announcements.bursamalaysia.com/E...200398B5A/$File/FHB%20Q4%202011%20(A).pdf
, Casa's 27.39% share of Fiamma's equity/NAV amounts to $26.0m, which is substantially higher than the corresponding carrying BV of $19.472m in Casa's latest B/S (30Sep11). The difference between these 2 figures can be attributed to Casa's original lower acquisition cost of this investment and currency translation differences.

If we use $26.0m to value Casa's 27.39% interest in Fiamma, Casa's NAV could be revised upwards by $6.526m, to $52.468m or $0.25/share. IMHO, this revised NAV remains conservative, as the fair value of Fiamma - which has a consistently profitable and growing business operation in Malaysia - should be at a decent premium over its NAV.