Powermatic Data Systems

[BlueKelah]

Thanks hh488 simple words like "Keep it up buddy!" will put a smile on my face.
It's not by S'pore Financial Reporting Standard to conduct fair value analysis on its Investment Property(FRS40), they have a choice to use Cost Model or Fair Valuation.
In this case they use Cost Model but have done F/V analysis of which stated in the Notes.

BlueKelah you just nail it down! Hope you don't mind I use some of your findings in my blog

FRS40 http://www.assb.gov.sg/docs/attachments/...0_2014.pdf

If you use any of the findings do reconfirm and support it with accurate figures extracted from the half-yearly report.

[CigarButts]

So does anyone knows why the board doesn't to use F/V instead where they could simply just increase its balance sheet figure?

Heard before in one of the value investing course in this website's banner that one of the students went to ask the management why they do not do so, the reply was that their core business was not in real estate, thus they did not do it.

[butcher]

1) Historical cost is more prudent and conservative than FV.
2) Revaluation is not free.

1. True
2. True, but they still paid for it every years.

I think someone had raised this question to the AGM as to why the company continuously showing net book value of its property in the balance sheet despite they have done valuation of which the value is stated in the notes.

The Chairman gave a very PC answer. He said "We are in an electronic business, and not in property business. Why should we use F/V approach".

I think the Chairman may not be well trained in finance, I think best to attend AGM and seek an answer from the auditors, cause think they should be the best person and should be well qualified to answer

[FatBoi]

1) Historical cost is more prudent and conservative than FV.
2) Revaluation is not free.

1. True
2. True, but they still paid for it every years.

I think someone had raised this question to the AGM as to why the company continuously showing net book value of its property in the balance sheet despite they have done valuation of which the value is stated in the notes.

The Chairman gave a very PC answer. He said "We are in an electronic business, and not in property business. Why should we use F/V approach".

I think the Chairman may not be well trained in finance, I think best to attend AGM and seek an answer from the auditors, cause think they should be the best person and should be well qualified to answer

I don't think we should conclude that the Chairman is not well trained in finance based on that statement. In the first place, FRS 40 Investment Property allows a policy choice to account for investment property at either cost or fair value model. There is no right or wrong to choose either. Do try the auditor, I would be surprised if they can give a good reason. Disclosure of fair value is a requirement under FRS 40 even if cost model is chosen. The issue is: do you want volality in the form of reval changes to hit your balance sheet? Some like it, some don't.

On hindsight, rising property values to date may hint at a missed opportunity to expand balance sheet through reval. gains but the reverse can happen if property slump hits. To recap: original rationale behind purchase of Harrison Road buildings is for new HQ to replace Joo Seng Road and generate better recurring returns on the surplus cash (vs. putting in bank through FD).

Their focus is to generate more stable cashflows to support volatile electronics business rather than to clock paper gains that look great but add nothing much to the business till realised through subsequent sale.

[bear]

Two pieces of news from Powermatic data.

The first is a proposed consolidation of every five existing ordinary shares into one ordinary share.

http://infopub.sgx.com/FileOpen/Powermat...eID=353518

The second is the full year financial statement.

http://infopub.sgx.com/FileOpen/Powermat...eID=353517

Revenue and gross profit dropped slightly,but net profit increases 34% due to higher foreign exchange adjustments gain(due to strengthening of US$ against SGD$).
As a result, EPS per share increases from 1.17cts to 1.55cts YoY, sufficient to pay out the 1 cent per ordinary share of dividend declared.

Cash and cash equivalent remains at more than $18 million as with last FY.

At the current price of 18.3cts, dividend yield is at a comfortable 5.45%,with a steady dividend payout it offers comfort in further accumulation.

[BlueKelah]

Good thing is the earnings this fiscal year are enough to sustain the div payout and still add to NAV

cash flow +

-v-

[desmondxyz]

Good thing is the earnings this fiscal year are enough to sustain the div payout and still add to NAV

cash flow +

-v-

It can easily give out at least 1.5 cts, but still 1 ct only. It doesn't need so much cash for capex and no indication of any acquisition....a bit disappointed but will hold on....

[CigarButts]

Just now got chance to buy at 0.19 for 53 lots. Wanted to snap all up but forgot password sial. Reset need the mailer sent to your house 2 workings days.

[bear]

If memory doesn't fail me based on the latest financial results quite a significant proportion of its EPS is due to FX gain.
Suppose if we strip away this FX gain the EPS is not significantly greater than 1 cent/share.So if management decides to increase dividend to 1.5 cents per share and for next financial year they failed to achieve similar EPS due to FX losses instead wouldn't the shareholders be extremely disappointed?

Having said that of course I understand one of the reasons that Powermatic Data remains undervalued relative to NAV and even taking into account the possibility of higher revaluation of its Harrison road property is that Mr Market expects a higher dividend to be moved.

[BlueKelah]

So if management decides to increase dividend to 1.5 cents per share and for next financial year they failed to achieve similar EPS due to FX losses instead wouldn't the shareholders be extremely disappointed?

without FX gains EPS would be still 1.1c which is enough for 1c dividend at least for this year, without dipping into cash pile.

Management will not increase dividend to 1.5c as the distribution business is not that hot nor growing. Not sure why the HYPOTHETICAL scenario of increasing div 1.5c should be even SPECULATED on.

The main reasons for its discount to NAV would be the stock is only a thinly traded micro-cap with current Mcap only at 33m and has no "sexy" story to spin. Coupled with a lousy distribution business that in the past year seems to be shrinking in revenue. It doesn't make the cut for a typical "dividend" stock which investors would buy for a passive income focus portfolio..

as mentioned before, management seems to be more interested in becoming a holding company. A big chunk of income already comes from its property and investments. There was even a "Fair value adjustment on available-for-sale financial assets of 1.793m" gain which was not used to calculate EPS. That's an extra 1c+ of paper gain which hopefully they lock in sometime soon.

Top 20 Shareholders already consist >80% of float. If they continue more share buybacks and after the share consolidation, there wont be many lots left to trade.

-v-