Spindex Industries

[dydx]

Spindex is due to release FY12 (ended 30Jun12) full-year results by 29Aug12. Assuming no major hiccups in customer orders and forex in 2H, I guess FY12 will likely be a year of restoration of normal profitability - with a NP of approx. $7.0m (giving an EPS of approx. $0.06), and an aftertax FCF (before capex) of approx. $10.0m (or approx. $0.087/share) - for Spindex. To me, the 1H (ended 31Dec11) results do provide enough confidence of better numbers and things to come in the coming full-year results announcement.....
http://info.sgx.com/webcoranncatth.nsf/V...000326986/$file/SpindexIndLtd-1HFY2011.pdf?openelement

A relevant question: Would Spindex's BOD also increase/restore the coming Final dividend to as high as $0.015/share (from the lowered $0.009/share in last FY11)?

Whatever it is, I guess Spindex will continue to build on its already bulging net cash reserve by its steady FCF generation.

[valuehunter]

Results out. Net profit up 92.4% to $7.166m. BS remains clean and solid. Pleasingly, its NTA is now 54.73 cents and net cash per share is $0.187. The MA division continues to do well too. Frankly, i'm quite thrilled that dividends of 1.8 cents per share has been declared. This is amply covered by the 4.079 cents per share of fcf. Relevant question is whether current share price is justified?

[dydx]

FY12 (ended 30Jun12) result just out.....
http://info.sgx.com/webcoranncatth.nsf/V...7003A8D65/$file/Spindex_FY12_Full_Year_Announcement.pdf?openelement
Quite simply, I think the result is a solid proof of Spindex's superior management!

Despite a small 7.7% yoy increase in revenue/turnover, in all the profit measurements - OP, PBT and NP, and even Comprehensive Income - Spindex has posted solid yoy increases and improvement; and the NP and cash generated have strengthened the B/S, equity, and net cash reserve further.

Just based on the EPS of $0.0621 and aftertax FCF (before accounting for capex) of $0.0975/share, and compared them with today's (27Aug12) closing share price of $0.335, Spindex shareholders are getting a return of 18.5% from earnings/EPS, and an even higher return of 29.1% from FCF. This is quite difficult to believe, but it is true! And this grossly under-priced situation is also evident if we were to compare the share price of $0.335 with the latest (as at 30Jun12) NAV/share of $0.5473, and net cash/share of $0.1878.

Another positive surprise! - Spindex's BOD has doubled the Final dividend to $0.018/share (from $0.009/share last FY11).

I guess tomorrow and in the next few days Mr Market may just turn to look at Spindex - an illiquid stock - differently and cheer up the share price towards its justified fair value!

[valuehunter]

Just based on the EPS of $0.0621 and aftertax FCF (before accounting for capex) of $0.0975/share, and compared them with today's (27Aug12) closing share price of $0.335, Spindex shareholders are getting a return of 18.5% from earnings/EPS, and an even higher return of 29.1% from FCF. This is quite difficult to believe, but it is true! And this grossly under-priced situation is also evident if we were to compare the share price of $0.335 with the latest (as at 30Jun12) NAV/share of $0.5473, and net cash/share of $0.1878.

Dear dydx, it's indeed hard to believe. I suppose that is why mispriced situations can be potentially very profitable, if investors are right in their judgement.

[julianbream]

Wow, Mr Market is supremely irrational. It’s like he and you have been walking for days in the desert without any water and then you come across a gigantic oasis (spindex). That oasis just grew bigger (FY 2012 results and dividend). And you are drinking water like crazy from it. But he just doesn’t see any water there and walks on…...

Then you start to wonder if you are hallucinating and the irrational one; and whether the water you are seeing in front of you is real….. but I believe it is, unless there is fraud, but it doesn’t feel like there is fraud in Spindex.

I wonder when the share price will reflect fair value. Maybe management should consider a share split or bonus issue.

[CityFarmer]

Spindex is in my watch list, and will remain in my watch list as of now

Spindex had a bad year in FY2011, with EPS drop from a high of 5.28 cts to 3.23 cts, a -40% drop. FY2012 result is recovered, increases from 3.23 cts back to 6.21 cts

Similar pattern exist for past years, but general trend is increasing. Base on the same pattern, next financial year, ESP will drop again

Gross margin around 18-19%, net margin 6-8%, a respectable performance, but definitely not marvelous.

Growth wise, revenue in FY2008 (5 years ago) is $79 Mil, FY2012 is $88 Mils, 5 years growth is 11%, average 2.2% annually. This is definitely not a grow stock

Dividend 1.8 cts @ market price of 35 cts, dividend yield ~5%. But the yield is not stable with

Dividend (FY2012) : 1.8 cts
Dividend (FY2011) : 0.9 cts
Dividend (FY2010) : 1.85 cts (1.5 final + 0.35 special)

[dydx]

Growth wise, revenue in FY2008 (5 years ago) is $79 Mil, FY2012 is $88 Mils, 5 years growth is 11%, average 2.2% annually. This is definitely not a grow stock

Dividend 1.8 cts @ market price of 35 cts, dividend yield ~5%. But the yield is not stable with

Dividend (FY2012) : 1.8 cts
Dividend (FY2011) : 0.9 cts
Dividend (FY2010) : 1.85 cts (1.5 final + 0.35 special)

I guess it could be too narrow a perspective if we just look at potential return based on Spindex's dividend payments and dividend yield.

Let's for a moment forget about further growth in Spindex's well-established turned-parts manufacturing business - which is still growing at a slow and steady pace! Is it conceivable that Spindex's management (who is also the controlling shareholder) may just decide to call it a day and opt to sell the entire business to the highest bidder, and before that the company would pay out all its cash reserve to shareholders as a special dividend? If this ever happens, Spindex shareholders would stand to receive some $0.20/share from the cash reserve alone, and easily another minimum $0.40/share - just based on an ultra-conservative valuation at 4x of the latest aftertax FCF (before capex) - for the operating business, which has a regional foot-print. Whichever way we choose to look at it, I suppose it is reasonable to assume and believe that the fair value of the entire business including the cash reserve within it should be higher than its latest NAV, which stands at $0.5473/share.

[CityFarmer]

I guess it could be too narrow a perspective if we just look at potential return based on Spindex's dividend payments and dividend yield.

Let's for a moment forget about further growth in Spindex's well-established turned-parts manufacturing business - which is still growing at a slow and steady pace! Is it conceivable that Spindex's management (who is also the controlling shareholder) may just decide to call it a day and opt to sell the entire business to the highest bidder, and before that the company would pay out all its cash reserve to shareholders as a special dividend? If this ever happens, Spindex shareholders would stand to receive some $0.20/share from the cash reserve alone, and easily another minimum $0.40/share - just based on an ultra-conservative valuation at 4x of the latest aftertax FCF (before capex) - for the operating business, which has a regional foot-print. Whichever way we choose to look at it, I suppose it is reasonable to assume and believe that the fair value of the entire business including the cash reserve within it should be higher than its latest NAV, which stands at $0.5473/share.

I always categories a stock before i invest. The stocks category will determine the strategy. Spindex is neither a grow stock, nor a dividend stock. Low growth of 2.2% annually does not quality it as grow stock. In-consistence dividend payment will not serve as good dividend stock.

Well, i am not a hunter for privatization, although i welcome it if it came for obvious reason .

The FCF ex CE is $4.7 mils i.e. $0.04/share. We need a 10x to become $0.40 which IMO may not justify for the company's biz. Bear in mind that the previous FY, the FCF ex CE is -$1.4 mils

I agreed that the company cash reserve of $0.20 with minimum debt is a very favorable plus point.

[dydx]

The FCF ex CE is $4.7 mils i.e. $0.04/share. We need a 10x to become $0.40 which IMO may not justify for the company's biz. Bear in mind that the previous FY, the FCF ex CE is -$1.4 mils

Do note that Spindex's yearly capex involves quite a big portion for capacity expansion and upgrading, including adding new factory space accasionally. These capex items tend to raise revenue and hopefully also profits and profitability in future years, the full impact of which is evident after usually with up to a 2 years' lag.

Do also note that to compute yearly FCF that adds to net cash reserve - i.e. from the perspective of the busines owners - it is better to also take out income taxes (i.e. on a aftertax basis), as well as the changes in WC items which are transient in nature and would eventually turn back into cash). If we do as above, we will notice that Spindex has been churning out solid positive FCF year after year, and these have added to the steadily growing net cash reserve balance, which is a now bloated one.

[CityFarmer]

Do note that Spindex's yearly capex involves quite a big portion for capacity expansion and upgrading, including adding new factory space accasionally. These capex items tend to raise revenue and hopefully also profits and profitability in future years, the full impact of which is evident after usually with up to a 2 years' lag.

I am not so sure the capex is for expansion? Base on revenue growth of only 2.2% average for the past 5 years, and the capex had been incurred during the same period. The capex is either mostly for maintenance or worst, failure in expansion.