Spindex Industries

[weijian]

hi seventyTimesSeven,

Learning to master our emotions (in this case, euphoria) is something that will multiply and give great returns in our investing journey. It works in euphoria and depression.

Benjamin Graham's personification of Mr Market is the most apt. We all start out as Mr Market ourselves but we owe it to ourselves to improve.

[wj1984]

Notwithstanding the good results and rise in share price, the market still can't seem to price this close to fair intrinsic value. 

Come on Mr Market, bid it up. Don't you see how much more this counter is worth?

I remember we were discussing what is the fair value for spindex. Below is what i hope for a BO and surprisingly we are at this number now. You mentioned you will not part with anything less than 1.1x of NAV. Current NAV is 1.17 which translate to 1.28 at 1.1x NAV which the share price did briefly touched. Did you managed to sell any?

wj1984
Even though profits have fallen... cash is accumulating... now sitting on 50m cash... owners hold 75% of the total no. of shares (115m) ... 25% of 115m shares at 0.85 = 24-25m sgd... say offering a 35% premium base on 0.85, which is 1.15 per share it would only cost the coy 33m to buy out. Don't even need a 3rd party...

[seventyTimesSeven]

Notwithstanding the good results and rise in share price, the market still can't seem to price this close to fair intrinsic value. 

Come on Mr Market, bid it up. Don't you see how much more this counter is worth?

I remember we were discussing what is the fair value for spindex. Below is what i hope for a BO and surprisingly we are at this number now. You mentioned you will not part with anything less than 1.1x of NAV. Current NAV is 1.17 which translate to 1.28 at 1.1x NAV which the share price did briefly touched. Did you managed to sell any?

wj1984
Even though profits have fallen... cash is accumulating... now sitting on 50m cash... owners hold 75% of the total no. of shares (115m) ... 25% of 115m shares at 0.85 = 24-25m sgd... say offering a 35% premium base on 0.85, which is 1.15 per share it would only cost the coy 33m to buy out. Don't even need a 3rd party...

Hi wj,

I did not unload any at 1.28. In the end, I sat on my hands and just watched. My thinking was that at that point in time, the NAV was probably higher than 1.17, as 1.17 is the figure at the half year mark. And it will likely be higher at the next announcement, given the way things are going.

In the end, perhaps it was merely a self-justification for my greed and now I am slightly regretting not parting with any shares (as the price has since fallen).

So many non-value investing emotions that I give in to. Easy to talk but not easy to do. This is probably the hardest part of investing.

[wj1984]

Hi wj,

I did not unload any at 1.28. In the end, I sat on my hands and just watched. My thinking was that at that point in time, the NAV was probably higher than 1.17, as 1.17 is the figure at the half year mark. And it will likely be higher at the next announcement, given the way things are going.

In the end, perhaps it was merely a self-justification for my greed and now I am slightly regretting not parting with any shares (as the price has since fallen).

So many non-value investing emotions that I give in to. Easy to talk but not easy to do. This is probably the hardest part of investing.

Well at the point of last result (HY2021) the NAV was 1.17 and not anything higher. It could be higher or lower the next result (FY2021).

Yes i agree with you whole heartedly that emotions can affect you from selling at the price you have set; thinking that it could go even higher. Its the same for me when i quoted a 35% premium earlier. I'm still holding as well (diamond hands) but because some of the main SHs are actually relatives.

[BlueKelah]

Whilst valuations are important, i think you have to factor in long term holding factors such as at a price above $1 how much further upside?(note spindex is not a high growth stock) How much dividend yield are you getting at that price?

A simple method I use to overcome emotion is to just sell out enough to cover your costs plus some gains and leave the profits to run on so to speak. That way you dont have to worry or think about the stock anymore.

At 30c+ many years ago it was a fantastic value gem. Now still making money but problem is how much are you getting back in dividends since stock price will just go sideways and drops are likely from highs.

No vested as sold out during the last offer. and redeployed into stocks like multichem /PNE which were better value. About to exit Multichem as well but their high +cash flow and IT security business seems to be doing very very well as we get more tech heavy so just trimming allocation a bit here and there.

[wj1984]

Whilst valuations are important, i think you have to factor in long term holding factors such as at a price above $1 how much further upside?(note spindex is not a high growth stock) How much dividend yield are you getting at that price?

A simple method I use to overcome emotion is to just sell out enough to cover your costs plus some gains and leave the profits to run on so to speak. That way you dont have to worry or think about the stock anymore.

At 30c+ many years ago it was a fantastic value gem. Now still making money but problem is how much are you getting back in dividends since stock price will just go sideways and drops are likely from highs.

No vested as sold out during the last offer. and redeployed into stocks like multichem /PNE which were better value. About to exit Multichem as well but their high +cash flow and IT security business seems to be doing very very well as we get more tech heavy so just trimming allocation a bit here and there.

True on the upside issue - could be due to little coverage on the media. It may be a good stock but if you are holding for say 5 years with only 30% price increase its not a fantastic investment.

I just quickly went through the AR, 2013 - 92m rev, 2014 - 98m rev (6%), 2015 - 114m rev (16%), 2016 - 124m (8%), 2017 - 141m etc. Its growth has been respectable. Not super high growth but definitely can be categorize as a growth coy.

At 30cent back then its revenue is not the same as today so it could also be fully valued based on the numbers then.

Lastly i'm holding out because i think they other big minority SHs (SELECT grp de-listing) would want a fat premium for their shares if the Tans want to privatize.

[BlueKelah]

Whilst valuations are important, i think you have to factor in long term holding factors such as at a price above $1 how much further upside?(note spindex is not a high growth stock) How much dividend yield are you getting at that price?

A simple method I use to overcome emotion is to just sell out enough to cover your costs plus some gains and leave the profits to run on so to speak. That way you dont have to worry or think about the stock anymore.

At 30c+ many years ago it was a fantastic value gem. Now still making money but problem is how much are you getting back in dividends since stock price will just go sideways and drops are likely from highs.

No vested as sold out during the last offer. and redeployed into stocks like multichem /PNE which were better value. About to exit Multichem as well but their high +cash flow and IT security business seems to be doing very very well as we get more tech heavy so just trimming allocation a bit here and there.

True on the upside issue - could be due to little coverage on the media. It may be a good stock but if you are holding for say 5 years with only 30% price increase its not a fantastic investment.

I just quickly went through the AR, 2013 - 92m rev, 2014 - 98m rev (6%), 2015 - 114m rev (16%), 2016 - 124m (8%), 2017 - 141m etc. Its growth has been respectable. Not super high growth but definitely can be categorize as a growth coy.

At 30cent back then its revenue is not the same as today so it could also be fully valued based on the numbers then.

Lastly i'm holding out because i think they other big minority SHs (SELECT grp de-listing) would want a fat premium for their shares if the Tans want to privatize.

If tans REALLY want to privatise they would have done so long ago, especially during the last offer. at best now you can get is usually NAV plus maybe 10-20%, that is if they even want to privatise. 

THey are already listed so many years, they can just play the long game and do share buybacks and other tricks to increase their stockholding more until its easy to delist. I think the son has taken over from dad too, so no impetus for older generation to sell out and retire.

By holding at high price, you also run the risk of the share crashing lets say 30%-40% during bear market, and then the offer suddenly appear at way below current prices. 

Business is cyclical as well, Spindex does not have a monopoly / moat on its business sector, its still a small cap with the 100m+ revenue, anytime downcycle , boom we are back to 60c or less. plus concentration risk to a couple main customers making up a lot of revenue.

Revenue growth has been respectable but i wouldnt say its a typical growth stock type. CAGR for revenue i think past 10 years around 7%+ and might be flattening out.

[weijian]

By holding at high price, you also run the risk of the share crashing lets say 30%-40% during bear market, and then the offer suddenly appear at way below current prices. 

Business is cyclical as well, Spindex does not have a monopoly / moat on its business sector, its still a small cap with the 100m+ revenue, anytime downcycle , boom we are back to 60c or less. plus concentration risk to a couple main customers making up a lot of revenue.

What you mentioned above, will probably apply to 99% of stocks. It doesn't have to be Spindex. While it is not applicable in every situation, but on aggregate on a portfolio level, holding out for the end game is much profitable and psychologically less taxing for the OPMI.

My personal experience clearly demonstrated to me that "time in the market" is profitable than "timing it" and I will treat it as part of the temperament training requirement of Mr Market.

However, I do not deny the repertoire of tricks that the substantial shareholder/owner will come up with, since they probably have more temperament and access to advice/funding than the OPMIs.

[dydx]

Since the Tan Family as controlling shareholder already holds a 74.95% interest, if they decide to sell Spindex's business to the highest bidder - likely a trade buyer - it should not be too difficult a deal for the buyer even to privatise the company in one GO exercise.

[wj1984]

Whilst valuations are important, i think you have to factor in long term holding factors such as at a price above $1 how much further upside?(note spindex is not a high growth stock) How much dividend yield are you getting at that price?

A simple method I use to overcome emotion is to just sell out enough to cover your costs plus some gains and leave the profits to run on so to speak. That way you dont have to worry or think about the stock anymore.

At 30c+ many years ago it was a fantastic value gem. Now still making money but problem is how much are you getting back in dividends since stock price will just go sideways and drops are likely from highs.

No vested as sold out during the last offer. and redeployed into stocks like multichem /PNE which were better value. About to exit Multichem as well but their high +cash flow and IT security business seems to be doing very very well as we get more tech heavy so just trimming allocation a bit here and there.

True on the upside issue - could be due to little coverage on the media. It may be a good stock but if you are holding for say 5 years with only 30% price increase its not a fantastic investment.

I just quickly went through the AR, 2013 - 92m rev, 2014 - 98m rev (6%), 2015 - 114m rev (16%), 2016 - 124m (8%), 2017 - 141m etc. Its growth has been respectable. Not super high growth but definitely can be categorize as a growth coy.

At 30cent back then its revenue is not the same as today so it could also be fully valued based on the numbers then.

Lastly i'm holding out because i think they other big minority SHs (SELECT grp de-listing) would want a fat premium for their shares if the Tans want to privatize.

If tans REALLY want to privatise they would have done so long ago, especially during the last offer. at best now you can get is usually NAV plus maybe 10-20%, that is if they even want to privatise. 

THey are already listed so many years, they can just play the long game and do share buybacks and other tricks to increase their stockholding more until its easy to delist. I think the son has taken over from dad too, so no impetus for older generation to sell out and retire.

By holding at high price, you also run the risk of the share crashing lets say 30%-40% during bear market, and then the offer suddenly appear at way below current prices. 

Business is cyclical as well, Spindex does not have a monopoly / moat on its business sector, its still a small cap with the 100m+ revenue, anytime downcycle , boom we are back to 60c or less. plus concentration risk to a couple main customers making up a lot of revenue.

Revenue growth has been respectable but i wouldnt say its a typical growth stock type. CAGR for revenue i think past 10 years around 7%+ and might be flattening out.

As what weijian mentioned earlier it could happen to 99% of companies but Spindex maybe that 1%. My view is that if you do a quick look through of the AR on minority shareholders you would notice that the TANS own 75% of the company and the rest of the SH hold the remaining 20%. Only 5% (115m stock x 5% - roughly 5.75m shares) is truly floating on the market.

Next if we dive deeper in the SH list, a particular family owns about 10% of spindex (of which it used to be visible on the list but since hidden under nominees). So in order for them to give up their stake they would probably need a fat premium else i'm sure they would be happy to hold on and share the good & bad times with the TANS.

Of course the TANS could in theory not pay / increase dividends during the good times but they have shown to be relatively SH friendly (judging from previous years where they increase dividends).

No doubt the share price could crash during a bear market which it did during march 2020 (from 0.9 - 1 to 0.68) but it also depends on your entry point.

Lastly cagr at 7% is respectable. I remember during one of my corp finance class a cagr over inflation is counted as a growth coy. But many of us are used to the super growth companies in the US.