TeckWah

[dydx]

Amazing close at 0.51 today. Also some big married deals done today. Is something up?

Do remember Teckwah's latest (as at 31Dec16) NAV/share is already at $0.6015, and FY16's EPS was $0.0586 and PBT at $20.091m was a new record. Why shouldn't a healthy and growing business with its assets conservatively recorded in its B/S be valued less than its NAV?

[Life is a game]

A very good business plus good management. Hard to find this type of business already. Some more not stingy with profits to share with shareholders and prudent in business decision also.

Sent from my SM-N9005 using Tapatalk

[luckystar]

In Singapore, many companies are TOO USED to trading below book value, and people are taking it as a norm. But it is not NORMAL.

[dydx]

In Singapore, many companies are TOO USED to trading below book value, and people are taking it as a norm. But it is not NORMAL.

But investors including institutions buy shares driven by value, a positive evaluation of the underlying business including its further growth potential (based on say the latest AR), coming dividend, etc., and all these factors are or seem to be present in Teckwah at the moment.

[weijian]

In Singapore, many companies are TOO USED to trading below book value, and people are taking it as a norm. But it is not NORMAL.

This is too simplistic as a general statement. There are reasons why many companies trade below book value. Some of the many reasons are (1) because of transaction costs are not included as book value is theoretical but in practice and real life, there are transaction and illiquidity costs. (2) Most of the accounting estimates, are at best estimates for the best case scenario, because a factory and its equipment that is used to make sardines, can only sell to another sardine maker without any need to incur retrofitting costs again.

Selling above book value, is really reserved for companies, that have a competitive moat not reflected on the balance sheet and the competitive moat allows them to have high sustainable ROEs, hence selling above book value. For example, there is a very low chance of SGX selling below book value - Its competitive moat comes from the fees it earn from its network of listed companies in the SG domain and more importantly, it doesn't need much capital to get the business going. It is further protected by a certain degree of operating leverage - it doesn't need much additional capital to scale its revenue. Cecurities daily average volume at 1bil (current) and 1.5bil (before penny saga in 2013) doesnt incur different amount of capital.

[luckystar]

This stock very kek sim. I know it is a good stock, but it kept moving higher. Generally, for a good stock that is undervalued, once it is discovered, it moved away very quickly. Like Tat Seng packaging etc..Sigh....

[gutman]

Interestingly there was a rare analyst coverage on Teckwah by CIMB yesterday. However, no ratings was given, ie no buy or sell call.  I believe the report has given life to the stock which spiked up yesterday.

See extracts of the report below:


Teckwah Industrial Corp Ltd
Printing out of box
■ Teckwah has successfully transformed from a paper box maker into a supply chain service provider; its non-print (logistics) segment formed 65% of FY16 group EBIT.
■ Core EBIT hit new highs in FY15-16 as investments bore fruit.
■ Strong cash flow, S$28m net cash; DPS raised to 2 Scts in FY16 (3.9% yield).
■ 9.6x FY16 core P/E (7.3x ex-net cash), 3.2x core EV/EBITDA, 0.81x FY16 P/BV.

Successful evolution from a box maker into a supply chain player
Since its inception in 1968, Teckwah has evolved from a plain paper box maker into a customised supply chain solutions provider offering a full suite of  services, such as printing and packaging, logistics, supply chain management, etc. With a global network of 102 sites (43 operational, 59 alliance) today, Teckwah serves mainly MNC customers in the IT, pharmaceutical and nutrition, lifestyle electronics and food and beverage sectors; some well-known names include Philips, Panasonic and Meiji. 

12% EBIT CAGR for the high-margin non-print business in FY07-16
Teckwah consistently grew its non-print (logistics) business in the past decade, with the segment registering an EBIT CAGR of 12.3% in FY07-16. Given its service-focused nature, the non-print segment enjoyed a higher as well as more stable operating margin of 15-16% in FY14-16 vs. the 2-7% margin for the manufacturing-based print-related (printing, packaging, etc.) business. Today, the non-print segment is Teckwah’s biggest profit contributor, representing 65% of group FY16 EBIT.

Previous strategic investments bearing fruit
Group core EBIT (excl. disposal gains, FX gains/losses, etc.) hit new highs at S$17.2m in FY15 and S$19.1m in FY16 vs. S$12.3m-14.9m in FY11-14. Management attributed the improving profitability to the several initiatives that Teckwah undertook during FY11-14, including: 1) investing in and moving into its new headquarters and print media hub - the Pixel Red at Paya Lebar iPark, 2) relocating its high-volume print and package activities to its new Iskandar factory, and 3) upgrading its China and Indonesia facilities.

Strong free cash flow building up net cash 
In the past decade, the group only recorded negative free cash flow in FY11 (-S$6m), FY13 (-$15m) and FY14 (-S$18m) due to the heavy capex for the above initiatives (the Pixel Red alone cost c.S$60m). Group free flow recovered strongly to +S$17m in FY15 and +S$26m in FY16 due to improved profitability, rent savings and lower capex. The balance sheet strengthened from S$7m net debt as at end-FY14 to S$28m net cash (25% of market cap) at end-FY16.

Dividend lifted for FY16
After declaring 1.5 Scts DPS (interim and final) for five consecutive years in FY11-15, Teckwah raised its total DPS to 2.0 Scts (0.5 Sct interim, 1.5 Scts final) in FY16. This translates into FY16 dividend yield of 3.9% and a payout ratio of 34%.

Valuation
Teckwah trades at 9.6x FY16 core P/E (ex-net cash: 7.3x), 3.2x EV/EBITDA and 0.81x FY16 P/BV (2.9 s.d. above historical average). Its FY15/16 free cash flows of S$16.7m /S$26.1m were higher than its net profit of S$12.4m/S$13.7m.

High profile management, low profile shares
Group chairman Thomas Chua is the key figure driving Teckwah’s transformation and development. He is a member of Singapore’s 12th and 13th Parliament and served two terms as president of Singapore Chinese Chamber of Commerce & Industry in 2013-17. We were not able to get hold management for a meeting.

[SLC81]

Another solid quarter with operating profit before income tax increases by 31%.  Paid down some debt and has a healthy balance sheet.

http://infopub.sgx.com/Apps?A=COW_CorpAn...7791267410

[dydx]

Another solid quarter with operating profit before income tax increases by 31%.  Paid down some debt and has a healthy balance sheet.

http://infopub.sgx.com/Apps?A=COW_CorpAn...7791267410

Quite clearly, the star is Teckwah's non-print business segment, which in 1H delivered a +8.2% increase YoY in revenue to $39.8m, and a much higher +23.7% increase YoY in PBT to $7.0m.

Based on the high 1H NP of $7.0m (+22.7% YoY) achieved, it looks like full-year NP could hit $15.0m (vs. $13.68m in last FY16), which would give a higher EPS of $0.0642 (vs. $0.0586 in last FY16) for FY17.

[gutman]

Teckwah seems to do well operationally. Even at recent price, the stock does not look expensive given that it trades at  0.718x NAV and gives a yield of 4.44% based on current price, with 1/4 of its share price backed by cash. Gearing stood at a low of 9.2%.

However, I think they need to improve on their investor relations.

Management needs to address the issue of liquidity as well as a lack of media attention. It has very low trading volume and no media covers them. Their latest full year result is not even picked up by Business Times or The Straits Time. I think no analyst covers them.

Apart from the financial ratios, I still have the same comments as mentioned above.