Salient points of Memtech's investment merits:
1. Lowest PB at 0.6x when its peers like Fischer, Fuyu, Sunningdale & Hi-P are trading above or near NAV
2. Net cash per share of $0.18 with an additional $0.05 coming in from the sale of a property; net cash make up of 33% of its market cap with a dividend yield of 3.5%
3. Historical Ex-cash PE estimated at 6-7x with a potential of a better valuation in 2017 given that 2016 is significantly impacted by the delay in Beats program
4. Market is skeptical because of its earning volatility, however, when viewed in the context of how it recovered from the keypad crisis due to smart phones and this is only 4 years since the height of the keypad crisis, I would say that Memtech is a very resilient company with very dynamic management
Read for better understanding: http://www.straitstimes.com/business/com...-sit-still
5. Memtech is very research & development (R&D) focussed. In its IPO prospectus in 2004, R&D is very much emphasized and in every annual report since IPO, the head of R&D is listed as a key management staff. We do not see this in its peers' annual reports.
In 2015 annual report in Key Management section:
Dr. Han Hui Sheng is the Director of our R&D Institute. He is responsible for overseeing the Group’s research
and development of new materials and technologies. Dr. Han has had more than 20 years of working experience
in material research and manufacturing since he graduated with a Bachelor’s degree from South China University
of Technology in 1985. He was awarded a PhD degree in Chemistry from Institute of Chemistry, the Chinese
Academy of Sciences. After two years of post-doctoral research on polymer materials at the National University of
Singapore, Dr. Han worked as QC Manager and Principal Engineer respectively in two Singapore companies. Dr.
Han joined us in May 2010. Dr. Han was named as an Innovative and Entrepreneurial Talent of Jiangsu Province (
江苏省“双创人才”) (2011) and a Jianghai Elite of Nantong City(南通市“江海英才”) (2012).
6. Given its expertise in keypads, Memtech has developed unique strengths in both plastic and rubber. It works with a mix of materials, for example, integrating silicone rubber and plastic or metal into a single product. I believe it is this edge that helps Memtech qualified as a supplier of automotive components within two years, quicker than the usual timeframe of three to five years. This compares very well with its peer, some of which has to resort to inorganic growth to grow their automotive business
Dated 10 April 2017 when share price is $0.705