TSH Corp

[valuebuddies]

Come across this company with my refined regular stock screening, was bery bery amazed by what they do, from ammunition disposal for the armed forces, to maintenance of bomb shelter, to being organiser for sport events, to fireworks presentation for NDP and major events, and finally into the consumer electronic accessories like speakers headphones etc. Probably the only pao sa pao hai small cap counter in SGX.

TSH is cash rich, zero debts and trade below its cash level, profitability was not quite stable following the commencement of the consumer electronic segments. This segment has been now the biggest contributor in revenue and profit. TSH has it's own brand and they started to market its products in US and Canada, in case you are wondering how's their products look like: https://www.facebook.com/pages/WOW-Techn...e_internal

What actually puzzled me is the fact that company skipped dividend since year 2012 despite profitable and holding lots of cash, and it has been very inconsistent in terms of profitability as well as the dividend payment. Obviously what I like the most is the cash they are holding (if they are real) as well as the almost non-existence competition for some of their business segment.

What do you guys think?

[beau]

Very interesting company. As valuebuddies pointed out, they are in a much niche market of their own. They are currently a net net at about 2/3 liquidation value. P/B ratio is 0.424. They trade below the cash on their balance sheet. Insiders have been buying back shares.

Their director Mr. Wong Weng Foo John bought back S$214,650 worth of shares in December 2014 at $0.09. The CEO's wife Khoo Bee Leng Joanna also bought back $990,000 worth of shares on the same date.

[BlueKelah]

Lack of any div despite good EPS previous years means mg is not opmi friendly.

FY 2014 seems revenue dropped off a lot.

[beau]

Lack of any div despite good EPS previous years means mg is not opmi friendly.

FY 2014 seems revenue dropped off a lot.

I personally don't feel the need for the existence of dividends when making my investment decisions. If you are the type of investor who needs to be compensated while waiting to realize value or a catalyst, then fine, but it is not a prerequisite for me.

I also don't feel that dividends despite good earnings are indicative of good corporate governance or not. Berkshire never paid a dividend, yet they are probably the most shareholder friendly company in the world. As a small time retail investor, I think it's very difficult to truly assess management quality, so I choose to invest based on more quantitative factors.

I don't ask for the moon when it comes to ridiculously cheap companies. The fact that they are a classic net net trading at two-thirds of liquidation value, is enough margin of safety for me; even if management could be atrocious. I think if you hold a basket of these, you'll do well in the long run.

[CityFarmer]

Lack of any div despite good EPS previous years means mg is not opmi friendly.

FY 2014 seems revenue dropped off a lot.

I personally don't feel the need for the existence of dividends when making my investment decisions. If you are the type of investor who needs to be compensated while waiting to realize value or a catalyst, then fine, but it is not a prerequisite for me.

I also don't feel that dividends despite good earnings are indicative of good corporate governance or not. Berkshire never paid a dividend, yet they are probably the most shareholder friendly company in the world. As a small time retail investor, I think it's very difficult to truly assess management quality, so I choose to invest based on more quantitative factors.

I don't ask for the moon when it comes to ridiculously cheap companies. The fact that they are a classic net net trading at two-thirds of liquidation value, is enough margin of safety for me; even if management could be atrocious. I think if you hold a basket of these, you'll do well in the long run.

Existence of dividend or not, isn't a determining factor for a quality stock, but it plays an important part in valuation of intrinsic value.

The argument is fallacious. The strategy based on net-net or liquidation value is fine, but conditional on assurance of no asset dissipation by atrocious management. This is a general comment, rather than a comment on the current management team. I have no insight on the company

(not vested, and sharing a view on value investing principle)

[beau]

Lack of any div despite good EPS previous years means mg is not opmi friendly.

FY 2014 seems revenue dropped off a lot.

I personally don't feel the need for the existence of dividends when making my investment decisions. If you are the type of investor who needs to be compensated while waiting to realize value or a catalyst, then fine, but it is not a prerequisite for me.

I also don't feel that dividends despite good earnings are indicative of good corporate governance or not. Berkshire never paid a dividend, yet they are probably the most shareholder friendly company in the world. As a small time retail investor, I think it's very difficult to truly assess management quality, so I choose to invest based on more quantitative factors.

I don't ask for the moon when it comes to ridiculously cheap companies. The fact that they are a classic net net trading at two-thirds of liquidation value, is enough margin of safety for me; even if management could be atrocious. I think if you hold a basket of these, you'll do well in the long run.

Existence of dividend or not, isn't a determining factor for a quality stock, but it plays an important part in valuation of intrinsic value.

The argument is fallacious. The strategy based on net-net or liquidation value is fine, but conditional on assurance of no asset dissipation by atrocious management. This is a general comment, rather than a comment on the current management team. I have no insight on the company

(not vested, and sharing a view on value investing principle)

I agree that burn rate is important. But does one attribute the cause of burn rate solely to the quality of management? Is your definition of good/atrocious management the ability to preserve NAV? Perhaps we are arguing over semantics when it comes to 'management quality'. In the case of TSH Corp, they have been increasing their NCAV over the past 5 years. NCAV was about 30m in 2014, 27m in 2013, 28m in 2012, 25m in 2011, 23m in 2010. If this is how you would judge quality of management, they are doing a good job.

[CityFarmer]

I agree that burn rate is important. But does one attribute the cause of burn rate solely to the quality of management? Is your definition of good/atrocious management the ability to preserve NAV? Perhaps we are arguing over semantics when it comes to 'management quality'. In the case of TSH Corp, they have been increasing their NCAV over the past 5 years. NCAV was about 30m in 2014, 27m in 2013, 28m in 2012, 25m in 2011, 23m in 2010. If this is how you would judge quality of management, they are doing a good job.

As disclaimed, I have no insight on the company, but a general comment, base on the argument of "2/3 liquidation is a sufficient MOS, even if management could be atrocious"

The counter points are
- Quality management will very likely conserve the asset value, in all biz cycles.
- Quality management will very likely decide to liquidate, if the company biz is obviously worth more died than alive.

For an "atrocious" management, no amount of MOS is sufficient, IMO. I recall, similar statement was quoted for S-Chip, which I agreed

[BlueKelah]

Lack of any div despite good EPS previous years means mg is not opmi friendly.

FY 2014 seems revenue dropped off a lot.

I also don't feel that dividends despite good earnings are indicative of good corporate governance or not. Berkshire never paid a dividend, yet they are probably the most shareholder friendly company in the world. As a small time retail investor, I think it's very difficult to truly assess management quality, so I choose to invest based on more quantitative factors.

not talking about corporate governance or quality with regards to dividend payouts but rather friendliness to OPMI. Withholding Div despite good earnings and no debt repayments is a pretty good way to judge mgt is not OPMI friendly.

Berkshire is one of the special cases and cannot be compared to most companies we look at as it is run by stellar management.

Buffett is also well known for loving to invest in companies that have proven to grow their dividends over a period of time.
Why Warren Buffett Hates Paying Dividends but Loves Dividend-Paying Stocks [Warren Buffett wrote in his 2012 Annual Report that, "We relish the dividends we receive from most of the stocks that Berkshire owns, but pay nothing ourselves."]

So one may need a different approach when looking at small companies with unknown mgt background and intentions.

With regards to Mgt quality, it is not that hard to assess. Just have to look through their annual report and see how the business has been run and how they tackle problems during bad times, like the recent GFC 2008/2009 and if they have made good investments or M&A with excess cash, if they have been growing the business.

Of course this will take both time to analysis and also experience through time.

If you take the mechanical way of graham's 2/3 discount to NCAV approach, it will be hard to get a basket of 20 stocks as such on the SGX.

[beau]

Lack of any div despite good EPS previous years means mg is not opmi friendly.

FY 2014 seems revenue dropped off a lot.

I also don't feel that dividends despite good earnings are indicative of good corporate governance or not. Berkshire never paid a dividend, yet they are probably the most shareholder friendly company in the world. As a small time retail investor, I think it's very difficult to truly assess management quality, so I choose to invest based on more quantitative factors.

not talking about corporate governance or quality with regards to dividend payouts but rather friendliness to OPMI. Withholding Div despite good earnings and no debt repayments is a pretty good way to judge mgt is not OPMI friendly.

Berkshire is one of the special cases and cannot be compared to most companies we look at as it is run by stellar management.

Buffett is also well known for loving to invest in companies that have proven to grow their dividends over a period of time.
Why Warren Buffett Hates Paying Dividends but Loves Dividend-Paying Stocks [Warren Buffett wrote in his 2012 Annual Report that, "We relish the dividends we receive from most of the stocks that Berkshire owns, but pay nothing ourselves."]

So one may need a different approach when looking at small companies with unknown mgt background and intentions.

With regards to Mgt quality, it is not that hard to assess. Just have to look through their annual report and see how the business has been run and how they tackle problems during bad times, like the recent GFC 2008/2009 and if they have made good investments or M&A with excess cash, if they have been growing the business.

Of course this will take both time to analysis and also experience through time.

I don't doubt for a second that you are much better at judging quality management quality than myself. I believe that for myself and most people, assessing management is a truly difficult thing to do. Warren Buffett can do it obviously. Personally I'm a big fan of Walter Schloss and I admire his style of investing. He rarely talked to management and chose to invest only on the numbers. He too felt that management quality was subjective and difficult to judge. Specifically, he liked to look at the assets (book value) more than the anything else. This has appeal to the common man like myself.

But of course, more than one road leads to Rome

If you take the mechanical way of graham's 2/3 discount to NCAV approach, it will be hard to get a basket of 20 stocks as such on the SGX.

This is true, but why limit your portfolio to the SGX?

Then comes the question of how many stocks do you truly need for adequate diversification. (I digress)

From Joel Greenblatt's book with the unfortunate title, "You Can Be a Stock Market Genius, "Statistics say that owning two stocks eliminates 46% of the non-market risk of owning just one stock. This type of risk is supposed to be reduced by 72% with a four-stock portfolio, by 81% with eight stocks, 93% with 16 stocks, 96% with 32 stocks, and 99 percent with 500 stocks.

It becomes quite clear that diversification starts to show diminishing results after a certain optimal number of stocks. Maybe less than 20 is fine. Again, this is probably subjective and preferential.

[CityFarmer]

Walter Schloss approach has been proven, but the strategy needs a full package to success.

A quantitative approach, but only diversifies into <20 stocks, rather than a much broader number, as proven by successful value investor, might invite negative surprises at the end of the day

In the statistic, the de-risk via diversification, is on systemic (market) risk, rather than non-market risk, IIRC.