Dutech Holdings

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#21
Dutech's Circular to Shareholders dated 7Sep11 on the proposed acquisition of German safe company FORMAT makes interesting reading.....
http://info.sgx.com/listprosp.nsf/bc9c2d...50011df9f/$FILE/Dutech%20Holdings%20Limited%20-%20Circular%20dated%207%20Sept%202011.pdf

More info on FORMAT....
http://www.format-tresorbau.de/en/home.html
http://www.altera-the-corporate-safe.de/...seite.html [website for FORMAT's "ALTERA" brand corporate safes]
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#22
Today (29Sep11), Dutech has completed the acquisition of German safe company Format, making it a wholly-owned subsidiary.....
http://info.sgx.com/webcoranncatth.nsf/V...8000F5042/$file/Completion_of_Acquisition_of_Format_29Sept2011.pdf?openelement

With this purchase, Dutech now owns and has the use of the "FORMAT" brand and its existing wide range of safe products to penetrate the global safe market. Great!
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#23
Dutech's 1Q results show a healthy increase in group revenue because of strong sales increase by its PRC-based manufacturing operation and after the acquisition of German safe producer Format.....
http://info.sgx.com/webcoranncatth.nsf/V...400399126/$file/Dutech_1stQ_31Mar12.pdf?openelement

Profitability wise, Dutech's operation in 1Q continued to suffer under an appreciating RMB (vs. USD) and inflationary pressure on labour and raw material costs in PRC. Notwithstanding all these negative factors, Dutech seems to be on a path of steady revenue increase leading to quite a strong profit recovery by 2013, being supported by rising demand for ATM safes from the emerging markets in Asia (especially PRC and India) and South America, as well as new business opportunities from EC and the expected synergies arising from the acquisition and integration of Format.

More info from Dutech's FY11 AR and subsidiaries' websites.....
http://info.sgx.com/listprosp.nsf/07aed3...6002b787e/$FILE/Dutech%20Holdings%20Limited-Annual%20Report%202011.pdf
http://www.tristarinc.com/en/index/index.aspx
http://www.format-tresorbau.de/en/home.html

Notwithstanding Dutech is based in PRC, I suppose producing safes for the world should be quite a safe business?
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#24
Hi dydx,

in the latest Q1 results, it's concerning that the prepayments to suppliers jump almost 300% from 10mil to 40mil. it's a common practice amongst the S-chip companies to prepay their suppliers. it could be a sign of something negative?

what are your thoughts?
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#25
(19-06-2012, 07:57 AM)changwk Wrote: in the latest Q1 results, it's concerning that the prepayments to suppliers jump almost 300% from 10mil to 40mil. it's a common practice amongst the S-chip companies to prepay their suppliers. it could be a sign of something negative?

I understand Dutech's main supplier of its key raw material (i.e. higher-spec steel plates) for safes manufacturing is Baosteel.....
http://www.baosteel.com/group_e/index.asp
which may offer price discounts or preferential production allocations (e.g. quantity or delivery wise) to customers who are able to make partial or full payments in advance. While the scale of Dutech's business of manufacturing of ATM/commercial safes has grown over the years, I suppose it remains just a small customer to Baosteel relative to the latter's huge size.

I see Dutech's strong and liquid B/S which allows it to have the flexibility to make advance payments to key suppliers in order to secure critical raw materials including at better prices as a strength and competitive advantage.
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#26
Valuations for Dutech seems be very attractive; trading at about 30% discount to its book value, an Average Price/Earnings of 4, and an Average Price/FCF of 6. Average earnings yield and cash return (based on enterprise value) is also extremely high (~50% and ~30% respectively).

However, there seems to be rather confusing contradictions in its fundamental performance.

While revenues and net tangible asset values have been increasing steadily, net profit has been jumping up and down erratically.

Furthermore, ROA and ROE and Net Profit Margin have been declining quite significantly ...

On the other hand, cash flow from operations and free cash flow have been increasing steadily (except for 2011), and the cash conversion cycle has been decreasing slowly (i.e. Dutech is able to slowly reduce the time between cash outlay and cash recovery).

It seems weird that these performance metrics are contradictory ... any thoughts? Does it indicate any erosion of Dutech's competitive advantage?
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#27
In addition, even conservative to semi-conservative DCF valuations would value Dutech's intrinsic value between ~55 million SGD to ~80 million SGD.

Based on my calculations, historical rate of Average FCF (CFO - Average Capex) growth way exceeds 10%.

For example, ultra-conservative assumptions of 5% growth in FCF for the next 10 years with 0% growth onwards, and a discount rate of 15%, the DCF model would value Dutech at about 272 million yuan (~55 million SGD).

If we are moderately conservative and assume 10% growth in FCF for the next 10 years with 0% growth onwards, and a discount rate of 13%, the DCF model would value Dutech at about 400 million yuan (~80 million SGD).

Currently, the market capitalisation for Dutech is about 40 million SGD.

A value buy? Seems like a rather large margin of safety in both DCF valuations (25-50%), as well as in NAV valuation (30%)

Disclaimer: My math may not be very accurate - I bluntly used the average of 2006 and 2007 to compare with the average of 2010 and 2011 to obtain historical growth rates. Not vested.
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#28
Well, maybe it is time to revisit Dutech for a while. No doubt it has certain moat by compliance with security standards ("UL", "CCC").

+ revenue has been growing y-o-y
+ debt stands around 30%
+ at NAV valuation discount of 35% at latest price of $0.131
+ In AR2012, Chairman & CEO Dr Johnny Liu Jiayan mentioned Dutech is one of the leading Original Equipment Manufacturers for gun safes. In US, there is a high gun ownership per capita rate and represents a huge market opportunity. But I am not sure whether universal background checks legislation, if passed, could hamper the sales of guns significantly.
+added undisclosed major customer to stable of clients

- Selling/General/Admin expense is growing at a rate faster than revenue growth
- from Year 2009 to 2012, bottomline has been dropping from 17.9% to 5.5%

There is also something to note that CEO Dr Liu purchased 2.8% and 2.83% from OCBC Capital Investment on March 20 and March 28 respectively. Something's up?
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#29
doesn't make sense. What price did he buy?
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#30
(01-05-2013, 07:38 AM)pianist Wrote: doesn't make sense. What price did he buy?

Both are at $0.13, according to disclosure. Public floating around 30% of issued shares.
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