Global Testing

[Boon]

The Company has generated substantial FCF over the past few years and repurchased a large chunk of its share float. I believe one of the rationale behind the recent corporate restructuring was to eliminate the accumulated losses hence enabling it to pay a dividend. It is likely this will be as high yielding as UMS assuming no sharp changes in revenue or capex.

(Not Vested)

On page 30 of AR2014, at the end of 31-Dec-2014, the accumulated losses were USD 28.283 m (at the Group level) and USD 29.632 m (at the company level).

In the capital reduction exercise, an amount of USD 29.632 m was applied to set off the accumulated losses.
 
On page 55 of AR2014 (11 DEFERRED TAX ASSETS):  Subject to the agreement by the tax authorities, at the end of the reporting period, the Group has unutilised tax losses and capital allowance available for offset against future profits as follows:
 
At End of 2014:
Unutilized tax losses = USD 59.552 m
Unutilized capital allowance = USD 4.644 m   

After the capital reduction exercise in which the accumulated losses had been completely eliminated, my take is Global Testing has to pay income tax on its future profit at the Company level in Singapore in order to declare any dividend going forward.

It appears to me that these unutilized tax losses and capital allowance are available for offsetting against future profits at the subsidiary level in Taiwan only – question is how much of these (if any) could be used to offset against future profits at the Company level in Singapore - which would have an impact on NPAT ?
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[yawnyawn]

FY2015 results is out - http://infopub.sgx.com/FileOpen/GTCL_4Q1...eID=391100

FY15 revenue ~ USD 33M against USD38M in 2014, a fall of 13%. OCF and FCF clocked USD16.8M and USD10.8M respectively which was slightly higher than what I expected.

Commentary
In a challenging year marked by a weak global economy and tepid semiconductor industry, the Group managed to remain profitable. This was largely a result of the management‟s efforts in operational efficiency, enhanced cost savings, and a tightened control on CAPEX.
Global semiconductor capital spending is expected to decline in 2016, reflecting a bleaker outlook for end-user electronics demand and the world economic environment. Amid these challenges, we have identified opportunities in China‟s rapidly expanding integrated circuit (“IC”) industry, which is expected to grow in 2016, as the China pushes to expand its market share in the IC design sector.
The earthquake in Tainan in Feb 2016 has affected the operations of some of our customers, which may in turn impact our sales.


No dividends was declared which was a disappointment considering GTC churns out close to USD10M FCF annually and they are debt-free. Market cap is 35M SGD at a price of $1.00/share.

(vested)

[yawnyawn]

(I) THE PROPOSED DIVIDEND; AND (II) THE PROPOSED CAPITAL REDUCTION AND CASH DISTRIBUTION
http://infopub.sgx.com/FileOpen/GTCL_Cap...eID=407785

Total of $0.20/share. This will cost the company ~$7M SGD.

Finally! Good things deserve to wait, congrats to all vested.

(vested)

[Boon]

WOW !

Total DPS for the year = SGD 20 cents.......................Extremely high dividend yield stock I reckon..........................

(I) THE PROPOSED DIVIDEND; AND
(II) THE PROPOSED CAPITAL REDUCTION AND CASH DISTRIBUTION. 

http://infopub.sgx.com/FileOpen/GTCL_Cap...eID=439859
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[yawnyawn]

FY2016 results is out - http://infopub.sgx.com/FileOpen/GTCL-4Q1...eID=439824

FY16 revenue ~ USD 31M against USD33M in FY15, a fall of 6.6% which is better than what management guided last year. OCF and FCF clocked USD11.6M and USD3.9M respectively which was largely due to working capital changes.

Commentary

Worldwide PC shipments declined 6.2% from 2015 on the back of lower product sales across the industry. The Chinese smartphone market also recorded lower sales volume of 3.75 billion units in 2016, compared to 4 billion units last year Global economic uncertainty is at a record high in FY2016 in light of significant political changes in major economies, such as the US, the European Union and China. This has largely weighed on business spending globally, further dampening demand for electronics and semiconductors, correspondingly.

Despite these developments, our Group expects to be profitable for the next quarter, underpinned by our cost rationalisation measures.


Dividend of $0.10/share and capital reduction of $0.10 was declared which is a surprise as i thought GTC would only declare dividend in the next quarter.

Market cap is 44M SGD based on current price of $1.24/share. GTC is still debt free and has S$11.5M based on USD/SGD 1.42.

(vested)

[Boon]

FY2016 Results:
 
Revenue (USD million):
FY2011 =  41.053
FY2012 =  37.212
FY2013 =  36.333
FY2014 =  38.004
FY2015 =  33.047
FY2016 =  30.866  (DOWN 6.6%%) = Lowest in 6 years
 
NPAT (USD million):
FY2011 = - 6.187
FY2012 = - 3.563
FY 2013 =  0.752 
FY2014 =   3.063
FY2015 =   3.685
FY2016 =   3.730   (UP 1.2%)
 
Gross Profit Margin :
FY2011 =  5.7%
FY2012 =  7.4%
FY2013 = 18.3%
FY2014 = 25.9%
FY2015 = 29.1%
FY2016 = 31.5%
 
Net Profit Margin :
FY2011 =  -15.1%
FY2012 =   - 9.6%%
FY2013 =     2.1%
FY2014 =     8.1%
FY2015 =   11.2%
FY2016 =   12.1%
 
EPS (USD cent)
FY2011 = - 0.76  
FY2012 = - 0.45
FY2013 =   0.10
FY2014 =   0.43
FY2015 = 10.42   (post 20:1 share consolidation)
FY2016 = 10.55
 
OCF (USD million):
FY2011 = 22.501
FY2012 = 17.831
FY2013 = 17.681
FY2014 = 20.059
FY2015 = 16.829
FY2016 = 11.645
 
Cash & Cash Equivalent (USD million)
FY2011 = 16.358
FY2012 = 20.584 
FY2013 = 28.301  
FY2014 = 38.590 
FY2015 =   9.276  
FY2016 =   8.117 
 
Capex : Purchase of PPE (USD million)
FY2011 =   4.881
FY2012 = 10.861
FY2013 =  4.952
FY2014 =  7.278
FY2015 =  5.991
FY2016 =  7.725
 
DPS (SGD cent) : Cash distribution via Capital Reduction
FY2011 =    0.0
FY2012 =    0.0
FY2013 =    0.0
FY2014 =    0.0
FY2015 =    7.5     (pre- share consolidation of 20 shares into 1)
FY2016 =  20.0     (post share consolidation of 20 shares into 1)
 
Number of Shares issued:
FY2011 =   792,151,001
FY2012 =  759,385,001
FY2013 =  722,907,001
FY2014 =  707,161,001
FY2015 =   35,358,027
FY2016 =   35,358,027
 
Comments:
1)   Revenue seems to be trending down – lowest in 6 years.
2)   However GPM, NPM, NPAT, EPS seem to be holding up quite well – all at 6 years high.
3)   FY2016 OCF of USD 11.645 m is at lowest in 6 years.
4)   FCF generated in FY2016 ~ USD (11.645 – 7.25) = USD 3.92 m, equivalent to USD 0.11 per share ( ~ SGD 0.155 per share)
5)   EPS of USD 0.1055 per share is pretty close to FCF per share for FY2016.
6)   DPS of SGD 0.20 (~USD 0.14 per share) is not sustainable based on FY2016 EPS or FCF generated.
7)   Going forward, if DPS of SGD 0.10 could be maintained (which seems more realistic) => dividend yield = 0.10 / 1.225 = 8.2% which is not bad.
8)   If DPS could be maintained at SGD 0.15, => dividend yield = 12.3%
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[Jacmar]

GT is basically milking the business as evident by the declining rev. In this business of fast moving tech you need to continuously invest in new tools to keep up with the new products coming. If you don't and continue to run legacy products, soon at one day you will be out of business. If they do invest then their FCF and div will go to hell. The good thing about running legacy products is that your margins are pretty good as your customers are reluctant to move out and spend the time qualifying another vendor. Just run it till obsolete. You have pricing power but declining vol.

[Boon]

GT is basically milking the business as evident by the declining rev. In this business of fast moving tech you need to continuously invest in new tools to keep up with the new products coming. If you don't and continue to run legacy products, soon at one  day you will be out of business. If they do invest then their FCF and div will go to hell. The good thing about running legacy products is that your margins are pretty good as your customers are reluctant to move out and spend the time qualifying another vendor. Just run it till obsolete. You have pricing power but declining vol.

Declining rev = milking the business?

Aren't they invest in new tools?

Capex : Purchase of PPE (USD million) 
FY2011 =   4.881
FY2012 = 10.861
FY2013 =  4.952
FY2014 =  7.278
FY2015 =  5.991
FY2016 =  7.725
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[yawnyawn]

GT is basically milking the business as evident by the declining rev. In this business of fast moving tech you need to continuously invest in new tools to keep up with the new products coming. If you don't and continue to run legacy products, soon at one  day you will be out of business. If they do invest then their FCF and div will go to hell. The good thing about running legacy products is that your margins are pretty good as your customers are reluctant to move out and spend the time qualifying another vendor. Just run it till obsolete. You have pricing power but declining vol.

Global Testing is purely a testing company doing wafer sorting and final testing in the semiconductor industry. Company should not be compared to ala StatsChippac as this is a sector that requires low capex requirements. The major capex is the buying or upgrading of new and existing tester machines. Tester companies generally do not incur raw material costs and they charge by hourly rates for their services(based on KGI report).

Mistake made by management before 2011 was the purchase of many new testers and since then, management has focused on upgrading existing testers periodically to reduce capex. From what I understand from management, a tester's useful life can last between 15-20 years if they are maintained and upgraded periodically.

Stock price is still attractively priced as similar testing companies in Taiwan(King Yuan and Giga Solution Tech) are trading at 4-5x OCF now as compared to Global Testing at 2.8x.

[LionFlyer]

http://infopub.sgx.com/FileOpen/GTCL_Q4A...eID=490508
http://infopub.sgx.com/FileOpen/GTCL_Cap...eID=490509

More capital reductions.