Transit-Mixed Concrete Ltd

[Nick]

Actually what caught my eye are not the concrete supply business, but rather the other 2 segments (concrete pumping and waste management). I have noted that Transit has been spending a lot on Capex for this two segments, which I think is positive but yet worry because they seems to over-stretching with negative cash flow produced for the past 2 years. The Capex spending for 1H2014 was S$1M, with no increase in finance leases. Positive sign is that overall the gearing has reduced to 13.7% versus 16% reported in FY2013.

Concrete supply business is tough. CEO told me that previously they were more concentrated in concrete supply but decided to slowly move out. Reason being they do not have the source for raw materials and have to buy from other suppliers. This meant that they could not control the price of their raw materials which means low margin.

Negative cash flow and working capital issues had been bought to their attention during the previous AGMs and it seems that they are financing long term assets with short term liabilities like using bank ODs to finance purchase of equipments etc.

However, their principal banker is UOB and Kheng Leong Company (Private) Limited holds around 22% of the company. Therefore, I think as long as they don't over-gear too much, it should be quite safe.

Hi Ghchua,

Just wondering - isn't the ready mixed concrete business a very small division in terms of profit contribution ? It is still largely a concrete pumping service company albeit profit has declined heavily since its peak in 2009. Are they diversifying entirely out of concrete including the pumping division ?

(Not Vested)

[ghchua]

Hi Nick,

What I meant is that they started out as a concrete supply business many years ago. Throughout the years, the concrete supply business had become smaller and smaller and what you are seeing now is really a small part of their overall business. No, they are not getting out of concrete pumping business. Concrete pumping is their core business right now. They can also lease out their concrete pumping vehicles to generate rental income.

They have a nice webpage. Do visit it:
http://www.tmcltd.com.sg

[valuebuddies]

A rather old article from BCA but put up for sharing here.

http://www.bca.gov.sg/newsroom/others/pr...14_BCA.pdf

It seems that the construction demands for year 2014 expected to be robust, especially from the public sector, which believe because of the construction of the Thomson Line.

(not vested)

[valuebuddies]

Another set of good results announced:

http://infopub.sgx.com/FileOpen/FY14.ash...eID=292679

- Full year revenue and profit up by 21% and 26% yoy respectively
- Company continued to spend big on Capex, yet still managed to improve the cash position to -ve 833k
- Increased dividend as expected, total for the year 3c (7.2% on last done)
- Volume being traded remains low, spread remains big

[valuebuddies]

Hit 50c the first time, after announcement of JV with PT Ascet Indonusa Tbk. Volume still low as not many know of the hidden gem.

[ odd lots vested ]

[valuebuddies]

Once again TMC produced a fabulous results:

http://infopub.sgx.com/FileOpen/FY15.ash...eID=346123

- Full year revenue and profit up by 13% and 56% yoy respectively, main contributor from the pumping segment which see both revenue and profit up by 21% and 64%
- For the first time out of many years, we see a +ve cash position, net CCE increased by 2.7M for the year
- Dividend increased for another round, total for the year 3.5c
- EPS is 7.7c means a payout of nearly 45%
- Volume being traded remains low, spread remains big

As usual, a short and consistent management's comments:

Looking forward, the construction industry in the region would continue to be active. Barring unforeseen circumstances, the performance of the Group is expected to be profitable.

[Some-one]

Other than it's poor liquidation and volume, I think this a good one to hold...

[valuebuddies]

Being value investors, should we care too much about the trading liquidity? Isn't it better to buy an undervalued stock while it is still flying below the radar?

[Some-one]

Being value investors, should we care too much about the trading liquidity? Isn't it better to buy an undervalued stock while it is still flying below the radar?

That's true. However, without trading liquidity, it is difficult to buy it at a discount to the fair value. After using residual income model, I arrived at an x value for this company but it still did not trade at a good MOS to the value.

[testwrite]

today trading volume for this counter is $4770, at an average price of 0.49, that is 8% jump from the last price, is 0.49 undervalue? i am not sure, during crisis you can buy it at 0.12 anytime, is that undervalue? but right now just to invest 5k in it, it cause the price to jump 8%, of course the jump most likely due to the good result of yesterday, but i am quite sure, if this is "undervalue", you will not be able to buy it undervalue without causing the price to jump, until no value