Memtech International

[level13]

Memtech is a classical case of a net-net stock. Using the latest 1Q 2014 earnings result, my back-of-envelope calculation after applying a discount on both inventories (25% off) & manufacturing assets (50% off) gives me a value per share of $0.10 (higher than the current market px). If one refers to the historical earnings results, one will observe that the cash pile is increasing even though the company is not making profit.

Granted the business it is in is not sexy (no nice story to spin). However, the catalysts i am expecting are:

- Turn around from loss making in Y2013 to profit in Y2014
- Increasing contribution from the automotive sector. Getting Tesla as its customer is a positive development as the trend is towards electrical cars. In addition, margins are generally higher for automotive products.
- Higher dividend for Y2014 results


(vested)

[BlueKelah]

Bad news for Tesla this month causing its shares to go down...

First the explosive accident on independence day with fiery fuel cells burning.
Read more here..

Second the court case in China for Tesla trademark
Read more here

Is Memtech reacting now in accordance to the Tesla news?

[heifien91]

Agreed that it is a net net, however, the key thing is that the probability of an upside is greater than the downside. Reason for this would be the company venturing into other businesses such as automobile, healthcare etc whose business does not change as much as the telecommunications. The reason why it suffered so much in the past few years I feel would be because of how fast the telecommunications sector was changing and the company being unable to keep up with it.

Don't think Memtech's price should be reacting to Tesla? Afterall they have other major clients like GM and VW.

(vested)

Memtech is a classical case of a net-net stock. Using the latest 1Q 2014 earnings result, my back-of-envelope calculation after applying a discount on both inventories (25% off) & manufacturing assets (50% off) gives me a value per share of $0.10 (higher than the current market px). If one refers to the historical earnings results, one will observe that the cash pile is increasing even though the company is not making profit.

Granted the business it is in is not sexy (no nice story to spin). However, the catalysts i am expecting are:

- Turn around from loss making in Y2013 to profit in Y2014
- Increasing contribution from the automotive sector. Getting Tesla as its customer is a positive development as the trend is towards electrical cars. In addition, margins are generally higher for automotive products.
- Higher dividend for Y2014 results


(vested)

[psolhawk]

Latest results are out. Slight decline in cash and a corresponding increase in inventories. Looks like they are preparing for more sales. Pared down loans a little as well. Mentioned in commentary that 2H 2014 will be comparable to 1H 2014, can expect full year EPS to be around 0.8 EPS. Given their generosity with dividends in the past, they may be able to better reward shareholders in half a year's time.

[heifien91]

Realised there isn't a thread on Memtech International. Found this company when it was trading at SGD 0.09 (USD 0.072) when NCAV was at USD 0.092 and P/E of 3.93x, EV/EBITDA of 2.4x and FCF Yield of 14.1%.

Initially, Memtech just services the mobile communications industry, however, they have started investing into the automotive and healthcare industry. Given how the automotive sector whose landscape is not changing as quickly as the mobile communications and the improvement in the automotive sector, the probability of the company producing positive results going forward is quite high.

Fast forward to today, the company announced their 3Q results last Friday and it has shown positive results with revenue and net income increasing qoq.

For a more in-depth writeup: Here

Cheers!

(vested)

[heifien91]

Sorry just realised I was looking at the wrong country. Could the moderators shift this to the Memtech Intl. thread in Singapore?

My bad.

[ngcheeki]

At last traded price of 9.8 cents, this company seems like a good buy with good Margin of safety. The following are some of the reasons:

1. Recovery play
After suffered losses for the last 2 years in FY2012/FY2013 for USD 11.152 mil and USD 3.804 mil, financial result in 9MFY2014 company showed a turnaround with a profit of USD 15.217 mil and a positive guidance in Q3FY2014 with "Group’s performance in Q4 2014 to be comparable to that of Q3 2014.". FY2014 result will likely be around USD 16 to 17 mil. After stripping off the 1-time gain of USD 11 mil, the final earning will be around USD 5 to 6 mil or EPS of around 1 S cent per share or PE around 10x.

2. 10 years of consecutive dividend payments history

memtech has been paying dividend for the last 10 years consecutively. If we assumed the company maintained the same dividend payment of 0.6 cents per share in FY2013 though the company was making a loss, the dividend yield will be around 6% which is quite attractive. However, based on their historical payout ratio, I am pretty sure the DPS for FY2014 will be higher.

3. Benefit from the plunge in oil prices

Memtech is a precision plastic OEM mainly in Automotive, Consumer Electronics and Mobile communications industries. With the fall in oil prices, their main "raw material" cost, plastics will also see a drop in prices. In the subsequent quarters, the profit margin should improved and reflect in their future results.

4. Good financial numbers and rock solid balance sheet

Based on the following data, it is traded with net cash of around 6 cents and below is net current asset of 11.5 cents, This will provide us with a good MOS.

The following are some of the numbers for your reference:

USD to SGD 1.25

9MFY2014
Total equity (US$ '000) 109,586.00
Total Number of Shares ('000) 705,920.00
NAV (US$) $0.1552
NAV (S$) $0.194
Intangible assets(US$'000) $880.0000
NTA (US$) $0.154
NTA (SS$) $0.1925

Trade receivables(US$ '000) $47,657.00
Inventories(US$ '000) $12,667.00
Cash (US$ '000) $33,744.00
Property, plant and equipment(US$ '000) $43,182.00
Total values(US$ '000) $137,250.00
(Sum of assets)/Total Number of Shares $0.1944

Cash (US$ '000) $33,744.00
Cash Per Shares(US$) $0.0478
Cash Per Shares(S$) $0.0598

Debt secured non-secured Total
Payable <= 1 year(S$ '000) $0.00 $0.00 $0.00
Payable > 1 year(S$ '000) $0.00 $0.00 $0.00
$0.00
Debt / Equity 0.00%
Cash - Debt $33,744.00
Net Cash per shares (USD) $0.0478
Net Cash per shares (SGD) $0.0598

Total Current Asset $104,873.00
Total Current Liability $34,392.00
Total Long term Liabilities $5,643.00
Net Current Asset $64,838.00
Net Current Asset Per shares (USD) $0.0918
Net Current Asset Per shares (SGD) $0.1148


Market Price per share (cents) $0.0980
Price to Book Value 0.5050


3QFY2014
Barring from unforeseen circumstances, we expect the Group’s performance in Q4 2014 to be comparable to that of Q3 2014

http://infopub.sgx.com/Apps?A=COW_CorpAn...2014Q3.pdf

vested

[Dividend Hermit]

I am accumulating Memtech as well.
Hope the market gives me enough time to rotate out of Oil & Gas (when it rebounds) and into Memtech or Hotung before their values are realised.
Cheers

(Vested)

[BlueKelah]

I am accumulating Memtech as well.
Hope the market gives me enough time to rotate out of Oil & Gas (when it rebounds) and into Memtech or Hotung before their values are realised.
Cheers

(Vested)

dun worry, from the sell queue there was always someone with plenty shares selling at 100 lots at 10cents everyday. from the looks of it someone is divesting his share. probably accumulated a heap during the lows during GFC.

-v-

[CY09]

Agree that Memtech is undervalued due to its low P/E and P/B ratio. Memtech does seem to be turning around now and its cash flow generated is capable of supporting its 0.006 dividends. Stripping off its one time gains and extrapolating its past 3 quarters results, Memtech is now at 10x PE

In fact, I find plastic molding listed companies in Singapore trade at such valuations (Sunningdale and Fischer), yet Mr. Market has continuously done that. These two companies trade at high FCF/yields too.

Is it due to the industry nature which warrants these companies to be at such valuations or is it because they are so small not many institutions take note of them, except for "analysts" at valuebuddies?

To heifien: How did you get FCF/yield of above 10%? I tried calculating, its below 5%