Serial System Ltd

[cfa]

Net margin not even 2% , if gross margins are squeezed , will there be any net margin at all ?

[VIChris]

Just 2 cents for all to ponder.

Same core management have been around for so many years.
The company has been in the red or financially weak for so many years. What makes you think they will succeed this time round?
Thin margin? As what CFA had highlighted, "if gross margins are squeezed , will there be any net margin at all ?"

[vesfreq]

Just 2 cents for all to ponder.

Same core management have been around for so many years.
The company has been in the red or financially weak for so many years. What makes you think they will succeed this time round?
Thin margin? As what CFA had highlighted, "if gross margins are squeezed , will there be any net margin at all ?"

I have to agree with you. The risks are big.

Then again, the core management consists of Derek Goh steering the ship. Correct me if I'm wrong. He started the whole biz from the back of a florist shop and has more at (equity) stake than anyone out there. There is more certainty that he has every reason to keep the ship afloat. What I fear is a company where the management has no vested interest in the long term survival of the company.

Still the odds are against them. Worrying....

On the side, I had a look at Venture Corp (which I think is a close comparison. Correct me, if there is a better comparison) and the gross margin for FY2014 was still 23%, while net margin is 5%. Overall still more profitable than SS.

Guess this one no need to vest at this point in time. Thanks for your views on SS.

[Stocker]

The ballgame of the competition today is totally different , many yesteryear gems like Creative tech etc. just can't coup with the intensive competitions.

[vesfreq]

If it interests anyone, I attended the AGM today. Cant recall the exact wording of the queries and replies. The following are some:

I posed some questions to CEO Derek:
Me: Stock impairment for FY2014 was 899k usd and fy 2013 was 1.8m usd. That is very significant. Any risk that this figure may escalate with your increasing sales volumes?
Derek: The company policy is 90 days to impair old inventory. Company is very conservative in terms of inventory impairment.

Another participant: Gearing level has came down in FY2014 compared to FY2013
Derek: Thats because SS is relying more heavily on (non-recourse) receivable financing.
Me: But, wouldn't that result in higher financing costs, as compared to longer term borrowings?
Derek: Actually, the financing cost for receivable financing is lower.

Me: Gross margins are lower 8.7 percent fy2014 vs 9 percent fy2013. Is this due to different in mix of sales of goods and services?
Derek: The acquisition of Serial I Tech resulted in dilution of margins, due to the lower gross margins from its business.

Another participant: SS share price is still 18 cents and this is lower than the new SGX requirement that share price of listed co has to be 20 cents or higher. Would this result in the company being put on watch list?
Derek: Not likely (or not possible). We will assess the share price for the coming months. If need be, we will do a share consolidation.

Me: SS has experienced large revenue growths. Would this continue to be tenable in the near future?
Derek: I am confident that revenues can grow to 1.3 b, with the number of acquisitions that we have done recently.

On the topic of turning to market for financing, Derek's view is that he will not do so, until share prices have crossed at least 40 cents. It makes sense, since any equity financing may not be meaningful with the relatively low share price at the moment.

Turning to receivable financing to bring down the gearing level sounds quite reasonable. I'm not in banking. Yet, its quite surprising to know that receivable financing can be cheaper than longer term borrowing, in terms of financing cost. Also, turn to receivable financing results in another problem.... their size of borrowing is pegged to number and value of sales invoices available to be financed. If there aren't enough sales invoices, they may even be short of financing. Quite a contradiction. May be SS has some way around it.

Another personal view is that net margins should likely improve due to the streamlining and consolidation of overlapping operating activities among the group companies. However, for this to fully materialise, it may not be immediately apparent within this year. Another real concern is, managing of the operations. Competent staff is required to keep the business operations efficient. Being heavily diversified into distribution of consumer goods is also a potential problem, given the poor global economic outlook. An unforeseen global recession will surely have a profound impact on the operating cash flows and sales volumes.

Also, my personal response to the comparison to Creative, SS is a very heavily diversified business. It has somehow restructured itself to intricately link into various parts of the global economy. It has businesses ranging from consumer goods distribution to ink cartridge retail. For SS to fail, it will likely take a bad recession to knock out all its various business divisions. Creative lacked that foresight in reinventing itself. In this sense, I think Derek is commendable in taking the helm to steer the ship. His challenges are surely not small, especially with the bringing in even more sales.

For your info.

Moi not vested.

[ghchua]

There is some difference here between Serial and Creative. Creative is a products company. Serial is a distributor. For products company, the key is innovation to come out with ground breaking products that can sell at a good profit margin. For a distributor, the key is to increase volume, increase distribution footprint and also keep costs down as profit margin is low.

For Serial, I have yet to see whether they can integrate the business of JEL and Achieva into their business well. The journey will be tough as these companies have struggled with their distribution business. For Serial to do electronics component, IT products and consumer electronics distribution all-in-one will be a big challenge. I certainly hope that they can execute it well going forward.

[efreet]

Vested since 13.5ct. Confident it will stay above 20ct convincingly, hence no need to consolidate

[greengiraffe]

http://infopub.sgx.com/Apps?A=COW_CorpAn...3Nov15.pdf

Why like tat?

[Sampling]

http://infopub.sgx.com/Apps?A=COW_CorpAn...3Nov15.pdf

Why like tat?

related to Securities and Futures Act, Chapter 289... interesting... I wonder what happened.

[cfa]

His former buddy and biz partner , Eddie Chng breached MAS rules more than 10 years ago , now his turn ?