Lee Metal Group

[Greenrookie]

Was reading up on union steel as I thought their scaldfolding business might be the turnaround catalyst wit the impending construction boom. The top line is ok, but bottom Line affected by Malaysia expansion. Which remind me of Lee metals outlook of a weak Malaysia market. Yet union steel can get orders and is ramping up inventories. A tale of 2 fortunes ?

[NTL]

BRC had increased their stake in the Malaysia subsi too. I do believe Malaysia do have a market considering that their Govt also need to implement measures against the property prices.

[Greenrookie]

BRC had increased their stake in the Malaysia subsi too. I do believe Malaysia do have a market considering that their Govt also need to implement measures against the property prices.

BRC Malaysia subsidiary is also on the merchandising business- buying scrap for recycling? Or is it the welding business? Otherwise, we might be looking at different market

[NTL]

According to their report, the malaysia subsi is involving in "Supplying iron, steel and other mixed construction materials for the construction market". While they specifically report weakness in China market, they did not report weakness in Malaysia market. Should be doing well.

[Greenrookie]

An write-up of Lee metals from my blog:


Lee metals is the only counter thus far that provide results that I expected.

Lippomall and Sabana are both disappointment.

Dividends increase from 2.5 cents to 3.5 cents.

At closing price of 39 cents, it is giving a yield of 8.9%. Beating most reits or trusts.

Is it sustainable?

Yes, IMHO, but only for 1 more year, as earnings from Austville will be realised this year. The EPS of 5.2 cents from that project itself (for calculation, see http://sillyinvestor.wordpress.com/2013/...-earnings/), should allow payment of DPS of 3.5 cents, a perhaps some “special” dividends. 2015 onwards, it will have to depend on operations, but dividends of 2 cents, is normal dividends, which I believe the management can manage.

Take away the 1 off-gain of amost 3 million from disposal of subsidiary, Lee metals will still be earning 37 mio net profits, still a record earnings.

With the higher EPS, the company has been fair to shareholder, with payout of 40%, which to me, is not demanding on the company finances. (Lee metals have payout of 30% to 50%, if we do include anormal years of 10% and 70%, which happen only once in their decade history )

FCF is 22 million, payout is 16.4 million. No strain on finances. CCC has increased to 114 days, the second highest in a decade. As for ROE, ROA, ROIC, inventory and receivables t/o, there is no red flag. Most are stable.

So what is the catch?

After 2015, competition is expected to increase, and supply are expected to exceed demand. That is the outlook of BRC asia, an competitor of Lee metals. Lee metals also expect competition to increase, but they are still expanding.

Lee metals have a good 10 year track record, I will enjoy the ride first. Given that it is so thinly traded, it doesn’t take much for the share price to breakout to the upside or downside.

[Clement]

Hi Greenrookie,

Thanks for sharing your thoughts on the company.

Given your outlook going forward, I am concerned about the higher capex going forward as they ramp up capacity. Current year net capex was around 16m if we take into consideration hire purchase agreements.

[Greenrookie]

Hi Greenrookie,

Thanks for sharing your thoughts on the company.

Given your outlook going forward, I am concerned about the higher capex going forward as they ramp up capacity. Current year net capex was around 16m if we take into consideration hire purchase agreements.

The purchase of properties should be 1-off cause, and of which 10 million is funded by long term loans. There have almost zero non-current loans in the previous quarter. As for capex for retooling the premises, it is not too big an capex if past purchases of welding machines are any guide.

My concern as usual will be, will the inventory management be robust enough to cope with the unexpected swing in steel price when it comes, and what happen after the construction boom?

The merchandising arm actually show a jump QoQ, with better margins of close to 2 %. Lets hope they can juggle the various equations well. Track records show they could.

[Greenrookie]

Lee metals will recognize revenue from Austville residences (TOP 27 May) in this coming quarter. Hoping for a special intern dividend.

Calculation of Lee metal share of EPS from austville is 5.2 cents. How I calculate that can be found at
http://sillyinvestor.wordpress.com/2013/...-earnings/

A reader commented my estimate is too optimistic. I used 20% Net margin, if it is 15%, then it's 3.9 cents EPS. Still enough to declare some special dividend of 1 cent perhaps?

[Greenrookie]

Lee metal results out.

http://infopub.sgx.com/FileOpen/20141107...eID=323415

In hindsight, expansion seem wrongly timed. Higher business volume not able to offset fall in steel price, resulting in lower turnover.

After this year, without Austville, eps should fall to around 4 cents. If 6- 8 PE is reasonable for this type of business, lee metals is actually "overvalued"

[Jack EL]

Anybody went for the AGM today? Just curious about some big volume buying.

By the way, shouldn't there be minutes after AGM especially if there are so many AGMs in one day?