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the lower the EV/EBITDA the 'cheaper' the company is but typically anything below 5 is considered value - at least for most PE funds.
Lizhong Wheel, Chosen and even previous manufacturers such as Armstrong and Adampak which were privatised all fall under this criteria. it is typically a more accurate reflection of manufacturing companies as they usually have certain level of debt.
Sunningdale is quite a much larger company compared to Fischer Tech in terms of their revenue and profitability levels but both seem rather undervalued compared to industry peers.
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This counter fits into the criteria of a net-net stock (depending on the degree of discount rate one tend to use).
Just a couple of days ago, it was trading at $0.80. Using a discount factor of 25% on the inventories & debtors as well as 40% on the plant/equipment & other non-current assets, one can get a per share value of $0.83 after deducting all the liabilities.
A couple of positives on this counter:
- past 5 years avg $17 million of operational cash flow per year
- current cash backing of $0.61 per share
- constant insider purchase
- switched a portion of the manufacturing capability over to Brazil (a low cost country)
- cheaper raw materials due to lower oil px
- dividend payout do tend to increase slightly over the years
- first nearly full year of revenue & earnings contribution from first engineering after buying and merging the operations in
last quarter of Y2014
- financial results in first 9M already exceeded the full Y2014 results
On the flip side:
- revenue/earnings may drop if this global slowdown continue, which results in a drop of new orders from customers from
IT and consumer product sector.
(vested)
There are no good stocks. Stocks are only good when they go up after you bought them.
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A small clarification help needed. The way the report is written seems to imply Income tax expenses help increase the profit ? I find financial reporting very interesting !
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- Revenue jumps 41.8% to S$674.5 million for FY2015
- profit of 42 million (will be 29 million if exclude currency gain)
- positive operating cash flow of S$67.1 million
- final dividend of 5 cents (increase of 25% YoY)
A fly under radar well managed manufacturing company will good amount revenue and profits generated from its assets over the years. I find it ridiculous that the current px only takes into account the cash and current assets.
Seems like Mr Market do not think that its hard assets are not worth anything meaningful.
What a pity!
There are no good stocks. Stocks are only good when they go up after you bought them.
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CF san
Incidentally, Sunningdale Tech was formed after Sunningdale Precision and Tech Group merged. That's why it is Sunningdale Tech and NOT Sunningdale Technology.
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(29-02-2016, 01:16 PM)HitandRun Wrote: (29-02-2016, 10:29 AM)level13 Wrote: A fly under radar well managed manufacturing company will good amount revenue and profits generated from its assets over the years. I find it ridiculous that the current px only takes into account the cash and current assets.
Seems like Mr Market do not think that its hard assets are not worth anything meaningful.
What a pity!
Erm Boss....
Not so long ago, making around $10-15m PAT was the norm for Sunningdale Tech. That kind of profit with capital of close to 300m capital is not really clever. Another thing is that the break-up value for plant and machinery of manufacturing companies => 不怎么样, not that great.
Yes. This is the usual sign of a plastic component manufacturing company. High capital needed for equipment but low margin as there are many similar companies fighting for the same pie.
But what i like is that the
shareholder friendly management is running the company very well under challenging conditions.
How many plastic companies can one name which has
consistent positive operating cash flow for the past 5 years?
How many plastic companies tend to
consistently declare dividends and also increase it over time?
Am also aware that the break up value for their assets will not be worth the amount carried on their books.
But the market seems to discount the above (assets & cash flow generation ability) completely. This is what i cannot fathom.
There are no good stocks. Stocks are only good when they go up after you bought them.
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