Spindex Industries

[ghchua]

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.

I agree with you. If the right offer comes, why not? Mr Tan had shown previously when he was in MMI.
https://www.financeasia.com/article/kkr-...ings/77743

As to the point that forumers mentioned about his son running the business and he might not want to sell out, he could structure a deal with a private equity firm and take out the minority shareholders and delist the company, while still allowing his son to run the company as a private entity. It can be done.

[weijian]

As what weijian mentioned earlier it could happen to 99% of companies but Spindex maybe that 1%.

hi wi1984,
I just want to clarify what I said earlier - What I wanted to point out was that BlueKelah is making a very general statement on companies and such "risk" are not unique to Spindex.

Personally, I also feel it is better to believe ourselves (and what we own) are the norm (99%), than the exception (1%)

[wj1984]

As what weijian mentioned earlier it could happen to 99% of companies but Spindex maybe that 1%.

hi wi1984,
I just want to clarify what I said earlier - What I wanted to point out was that BlueKelah is making a very general statement on companies and such "risk" are not unique to Spindex.

Personally, I also feel it is better to believe ourselves (and what we own) are the norm (99%), than the exception (1%)

Understood! It is always better to lower your expectations so that in any case if it happens to be the norm at least the disappointment will not be that great.

Sides, Spindex is currently trading at NAV which is very very reasonable for a stock with little to no coverage.

[¯|_(ツ)_/¯]

Spindex @ 115

Our factory in Johor, Malaysia (“Malaysia Factory”) will still continue to run at the limited capacity as per the previous update.

As previously highlighted, the financial impact is not quantifiable, but is expected to have a negative consequence on the financial performance of the Group in FY2021.
https://links.sgx.com/FileOpen/Spindex_E...eID=671116

Stay home and stay safe, everyone.

[Big Toe]

There are some good listed companies that have significant production plants in Msia, and I have faith that these businesses will overcome the current difficulties BUT I have less faith in the political system there and how they are able to handle the pandemic. It will eventually be over but the question is when and at what cost to the companies. Different levels of uncertainty over different countries, and a large part of it is due to their leaders. The pace of recovery will be extremely different country to country.

[wj1984]

another set of good result (H1 FY2021 was the other one); overall EBITA increased 70% y-o-y and FY2020 was not a low base like many other companies (about -16.8% from FY2019). Revenue also increase.

Large capex this year at 30m. Finally borrowed 6.5m thereabouts but via enterprise SG, the rates could be low and government pushing for companies to accept the loans?

Dividend increased from 2.8 cents to 4.5 cents (60% increase) or 3.3 cents to 4.5 cents (36% increase if base on pre-covid numbers)

Again management will not give much hints on the business moving forward; always the same words market is volatile etc.

Solid business but i am not sure if they would be able to sustain the growth rate.

[ghchua]

Hi wj1984,

Solid business but i am not sure if they would be able to sustain the growth rate.

Reading between the lines, I see three main factors that contributed to their profit growth:

1. The change to a home based working arrangement as well as more time spent at home have contributed to new demand for office equipment, domestic appliances and hobby-related equipment.

2. Actual as well as potential Covid-19 related disruptions to the global supply chain have continued to result in some forward stocking of components.

3. Group was able to maintain its gross profit margin at 22.5% in H2 FY2021 in spite of higher costs of raw materials, transportation and labour.

Therefore, we can see that the first two factors were really related to Covid-19 while the third one is really good cost management.

I do see the first two factors tapering off when Covid-19 restrictions eases. However, they will still do decently well with their margin with good cost management. I don't see such good growth rate being repeated every year, but they will still do decently well in the long term.

[wj1984]

Hi wj1984,

Solid business but i am not sure if they would be able to sustain the growth rate.

Reading between the lines, I see three main factors that contributed to their profit growth:

1. The change to a home based working arrangement as well as more time spent at home have contributed to new demand for office equipment, domestic appliances and hobby-related equipment.

2. Actual as well as potential Covid-19 related disruptions to the global supply chain have continued to result in some forward stocking of components.

3. Group was able to maintain its gross profit margin at 22.5% in H2 FY2021 in spite of higher costs of raw materials, transportation and labour.

Therefore, we can see that the first two factors were really related to Covid-19 while the third one is really good cost management.

I do see the first two factors tapering off when Covid-19 restrictions eases. However, they will still do decently well with their margin with good cost management. I don't see such good growth rate being repeated every year, but they will still do decently well in the long term.

Hello ghchua,

thanks for your insights. I have always appreciated your comments elsewhere in the forum especially on the SGX rules.

back to spindex, i agree that we would not see such growth rate again and the corresponding spike in share prices after the last 2 reports were issued (0.9 to 1.1, 20% and 1.2 to 1.3, 10% respectively). Nonetheless it have a decent margin & extremely FCF positive but do not get much love from investors.

another interesting point to note is that they have started a joint venture (iirc it is in vietnam) which is quite small (1.6m vs spindex 130m market cap) and surprisingly so quickly took a 250k write down.

[dydx]

Spindex has a proven management team headed by a father-and-son duo - also the majority controlling shareholder - at the top. Their track record has shown that they are smart, experienced, prudent in capital allocation and financial management, and effective in execution of expansion plans. There is fair chance that sooner or later a friendly party would offer to buy the whole business, or partner the Tan Family to privatise the company.

[wj1984]

Spindex has a proven management team headed by a father-and-son duo - also the majority controlling shareholder - at the top. Their track record has shown that they are smart, experienced, prudent in capital allocation and financial management, and effective in execution of expansion plans. There is fair chance that sooner or later a friendly party would offer to buy the whole business, or partner the Tan Family to privatise the company.

Hello dydx, i agree with your comments on 'smart, experienced, prudent in capital allocation and financial management, and effective in execution of expansion plans' 

i would add on that they are more of the risk averse, slow & steady kind of management. They did attempt to do a MBO in 2017 and were quite hostile (hindering the DD) towards a competing offer due to their toehold in the company.

Previously i thought they would have a better chance of self financing the entire buy out with the cash on hand ($51m); tan family owns 75% of 115m shares only leaving 28.75m free float. But they have since spend a large amount on Capex (though they also generated a huge CF) this year and the cash pile has fallen to 40+m.

I would probably ask during AGM on whether they decided to payoff the entire Capex (about 3x larger than their biggest capex in 5 years) instead of paying it over the years so that i could better predict their FCF over the next few years.