Adampak

[psslo]

julian,

Hard disc & electronics industry are notoriously cyclical in nature & does not move in a straight line historically like what you projected. So you will need to watch for the market trend & sell before a down cycle. Timing is important.

And as a company grows bigger, the margins can get squeezed and growth rate will slow down as the base increase.

[dydx]

Hard disc & electronics industry are notoriously cyclical in nature & does not move in a straight line historically like what you projected.

This is not quite true, I think. What we can see is that people all over the world are buying more electronics (all types of PCs and other personal computing/digital devices, phones, cameras, entertainment gadgets, etc.), brown/white goods (TVs, projectors, ovens, fridges, washing machines, small household appliances, etc.), and other goods (medical devices, vehicles, etc.) and services (shopping, healthcare, etc.), all of which have and use precision printed labels and die-cut parts/components at an increasing rate. We can easily confirm this trend by reviewing the growth and financial track record of Adampak and companies like Armstrong, Brady, etc., over the years.

To better understand the resilience of the label/die-cut converting industry and the underlying demand for precision printed labels and die-cut parts/components, other than reviewing Adampak and its product portfolio.....
http://www.adampak.com.sg/Products/Index.htm
we can take a look at the example of Marian Inc. (a medium-size U.S.-based converter which has a small production facility in Singapore).....
http://www.marianinc.com/corporate-mainm...nu-82.html
By reviewing Marian's 56-year corporate history and uninterrupted growth (under "Corporate" section) and products (under "Applications") and watching their corporate video, we should get a better idea of the growth potential and possibilities of Adampak in the years to come.

[dydx]

Adampak will soon announce the FY10 (ended 31Dec10) full-year results. [Last FY09, it was made on 26Feb10.] Based on the solid 1st 3Q's performance.....
http://info.sgx.com/webcoranncatth.nsf/V...80031C004/$file/ResultsQ3_2010.pdf?openelement
, there should be little surprise in having a set of very good full-year numbers (including the B/S).

As usual, there should be also a good Final dividend. [Last FY09: $0.015/share] Bearing in mind Adampak already had a large nett cash reserve as at 30Sep10 - giving a nett cash per share of $0.05 - and the expected big increase in the full-year NP (vs. FY09), I am hoping for at least $0.02/share this time round. I am optimistic here, as Adampak's CEO Chua has said before that it is not the management's desire to want to keep too much excess capital/cash in the company as this would lower its recurrent ROE. Let's see how far he will go on this score and to reward shareholders as well.

[Foxer]

Hi dydx, I'm personally vested in the company, but because I though the stock was very cheap, generates a stable cash flow and distribute those cash in the form of dividends. However I don't think that long term potential of the company is as good as you perceived it to be.

For one thing, let's look at the earnings per share.

2006- 0.033
2007- 0.040
2008- 0.025
2009- 0.025
2010- 0.035 (estimated based on first 3 quarters results)

Hi Juilianbream, with only 1.2% compound growth in earnings per share over the past five years, I wonder why you assume a 10% growth rate for the future? While the profits has grown by 20% the past five years, it has come as the cost of issuing more stock, suggesting a cutthroat business. While the company can make more and more money in the future, individual stock are unlikely to become more and more valuable.

But I intend to hold this stock as long as the fundamentals doesn't deteriorate too rapidly. I bought it very cheaply, and like the dividends. haha

[dydx]

For one thing, let's look at the earnings per share.

2006- 0.033
2007- 0.040
2008- 0.025
2009- 0.025
2010- 0.035 (estimated based on first 3 quarters results)

I think your EPS numbers are inaccurate. I have extracted the folowing EPS numbers (in US cents) from Adampak's FY09 AR (p7) -

FY2005 - 2.03 (based on NP of USD3.571m, and 175.75m shares)
FY2006 - 3.28 (based on NP of USD5.765m, and 175.75m shares)
FY2007 - 3.18 (based on NP of USD7.14m, and weighted average 224.382m shares)
FY2008 - 2.56 (based on NP of USD6.749m, and 263.625m shares)
FY2009 - 2.46 (based on NP of USD6.492m, and 263.625m shares)
FY2010 (estimate) - 3.47 (derived from extrapolating 1st 9 months' NP of USD6.857m, and based on 263.625m shares)

When interpreting the above EPS numbers, we have to bear in mind the following -

1. In May07, in the interest of shareholders who could derive tax benefits from the company's remaining S44 tax credit (expiring 31Dec07), Adampak undertook a 'free-of-charge' 1-for-2 rights issue priced at $0.082 per rights share, which shareholders could pay for it by a $0.05/share concurrent Special dividend payment.....
http://info.sgx.com/webcorpinfo.nsf/Corp...endocument [1-for-2 rights issue in 2007]
http://info.sgx.com/webcorpinfo.nsf/Corp...endocument [Special dividend paid in 2007]
The rights issue raised the total number of issued shares from 175.75m, to 263.625m. This had dampened EPS in FY2007, and exerted a dampening effect on EPS numbers of FY2008 and FY2009.

2. The fall in NP and EPS of FY2009 was mainly caused by a sharp fall in business volume in Q1 and Q2 during the last global financial crisis which started in Q3 of FY2008. Adampak's business staged a strong recovery in Q3 of FY2009 and has since posted further quarter-over-quaater gains.

For FY2010, an EPS of 3.47 US cents will translate to approx. Sing 4.44 cents (based on the USD/SGD exchange rate of 1.28).

[dydx]

I am totally pleased with the just released Adampak FY09 (ended 31Dec10) full-year results.....
http://info.sgx.com/webcoranncatth.nsf/V...60029B4E9/$file/FullYearResultFYE2010.pdf?openelement [FY10 results announcement]
http://info.sgx.com/webcoranncatth.nsf/V...60029B4E9/$file/PressReleaseFYE2010.pdf?openelement [Press release]

Like in previous years, profit increases at GP, PBT and NP levels were all higher than revenue increase. This again shows Adampak management's ability in extracting good profits and margins at every level, by having (1) consistent pricing policies and a strong-enough bargaining position with customers; (2) competitive sourcing of raw materials; (3) efficient and flexible production, including good labour productivity; and (4) effective controls over distribution/selling and administrative expenses. I am most impressed by Adampak's ability to keep margins high even during H2, during which the USD actually depreciated against the regional currencies by a big margin, and this should have 'inflated' the group's operating expenses denominated in local currencies when converted into USD - Adampak's reporting currency.

It is also important to note that Adampak has gained steady traction in growing business volume from the non-HDD electronics, telecommunications, and non-electronics sectors. If this positive trend continues, then Adampak will rely less on the HDD sector, and a more balanced customer portfolio will emerge over time.

Adampak's B/S as at 31Dec10 remained rock-solid.

Best of all, a higher $0.02/share Final dividend (vs. $0.015/share for FY09) has been declared. Together with the $0.01/share Interim dividend paid, total payout for FY10 is $0.03/share (vs. $0.0225/share for FY09) - a new record!

Is a further re-rating of Adampak's share price upwards justified? My answer: I shall leave it to the analyst reports that will come out after the usual result briefing, to nudge or tell Mr Market as to what he should do.

[dydx]

Adampak has released the slides for the FY10 full-year results briefing.....
http://info.sgx.com/webcoranncatth.nsf/V...700169596/$file/ResultsBriefing4Q2010.pdf?openelement

It pays to go through the slides together with the result announcement and press release to appreciate the very high-quality in Adampak's business and financial state.

Based on Adampak's FY10 EPS of USD0.0354 - equivalent to $0.045 - and today's closing share price of $0.335, Mr Market is now attaching an historical PER of 7.44x on this gem-grade business/company. Shouldn't a PER of at least 10x be more appropriate?

Based on Adampak's 31Dec10 nett cash balance of USD11.903m, per share nett cash amounts to another $0.0573 in additional value. Or shouldn't this be more, as 100% of Adampak's high-quality trade receivables balance of USD15.001m as at 31Dec10 is self-funded by its own equity, and we know very well sooner or later the trade receivables will turn into cash.

[dydx]

When the whole market suffers a mini meltdown today, I am very much heartened to see Adampak's share price holding steady, with a total absence of any panicked selling. Considering Adampak has such a high-quality business, and the payment of the $0.02/share Final dividend is just round the corner, this is hardly surprising.

Discounting the coming $0.02/share dividend from the last done share price of $0.33, buyers now are in effect paying approx. $0.31/share. Assuming going forward Adampak continues with its proven twice-a-year dividends payment record and a total yearly payout of at least $0.03 (same as FY10), we are looking at a potential very much assured gain of approx. 9.68% p.a. from dividends alone, while pacing the further growth of the underlying business and its intrinsic value over time. Not a bad deal at all, I thought!

I just hope that the expected slowdown of the Japanese manufacturing sector after last week's devastating earthquakee and tsunami will lead to a transfer of electronics orders to S.E. Asia and PRC, which should be a boon to Adampak's well-established network of manufacturing plants in these countries.

[dydx]

I am pleased to share that year-to-date (i.e. since 1Jan11), Adampak's share price performance relative to the STI (as a measurement of the market-average of blue chips listed on SGX) is up by a little over 8%.....
http://finance.yahoo.com/echarts?s=5EZ.S...=undefined

This is indeed a very good show! What it basically means is that in terms of share price alone, Adampak is doing much better than the average blub-chip listed on SGX. Of course, in terms of total return - i.e. share price plus the coming $0.02/share Final dividend for FY10 - it will be even higher.

[FFNow]

I have been looking to research into a company and I thought I would look into Adampak after dydx mentioned it in the F&N bonds topic. I have got a few simple questions. Hopefully someone can shed some light.

1) I don't understand fully what business Adampak is into even after reading every single post in this thread and looking at Adampak's website. What do converters and die-cut parts mean? Do they supply the label stickers found on HDDs?

2) I understand HDD constitutes more than 50% of revenue. How will the shift to SSD affect Adampak as SSD needs labels just like HDD do right? So, how will this affect Adampak? Pls enlighten me.

3) Does Adampak have a wide moat? I don't see how a company making labels can have a competitive advantage even though they have high GPM and NPM.

4) How many competitors does it have in SG and worldwide?

5) Does Adampak compete based on price alone?

6) Which companies are its end users? Seagate, Maxtor and who else?

Looking forward to your replies. I really looking hard into this company as I believe it's grossly undervalued from the financials. Just want to know the qualitative aspects of the company. Thanks!