(23-10-2014, 11:25 AM)Shrivathsa Wrote: I am just adding this note to consolidate the past analysis done by various sources on PEC.
A technical trade was advocated in Sep 2012
http://www.andy-yew.com/2012/09/singapor...t-pec.html
I guess this did not work out much
http://singaporestockmarketnews.blogspot...shing.html
Bottom fishing was advocated and did not seem to pan out.
http://singaporestockmarketnews.blogspot...group.html
A technical rebound was expected, did not pan out.
A very balanced view on next insight
http://www.nextinsight.net/index.php/sto...tay-vested
The dividend has been cut to 2 cents.
It goes ex dividend shortly.
My guess is that the stock will dive ex dividend to sub 50 cents levels.
I have not done any further analysis, but i think it might be an interesting buy at around 40 cent levels
Hi Shrivathsa, thanks for including my article (republished with permission on NextInsight) as one of the analyses done on PEC. I relooked at it and cringed at its quality.
All things equal, I agree with you that PEC share price can drop under 50 cents ex-dividend.
At last close of 52 cents, PEC is trading at P/E 14 times (52 / 3.6 EPS), 38% discount off NAV (52/83.9 NAV). The company is profitable but NPAT margins have been low single-digit (2+%). Balance sheet is expanding (as shown below) even after taking into account dividends paid out.
Retained earnings:
2010 - 123.8 mil
2011 - 145.8 mil (+17.8%)
2012 - 149.6 mil (+2.6%)
2013 - 155.5 mil (+3.9%)
2014 - 158.2 mil (+1.7%)
I am not an expert in this industry and PEC's underlying businesses but I believe besides the broad stock fundamentals to guide our assessment of whether PEC's share price is cheap or not, it pays to keep notes of what mgmt articulates as their intended strategies and follow through their execution. Then revisit the financial impact of those strategies. Otherwise mgmt can say all the nice fluffy things all they want, it does not translate to increase in bottom line - which is important whether you are looking for dividends or capital gain (or both).
Prospects and actions (from 2014 annual report):
- Expect energy demand to grow in mid-long term (targeting new clients in adjacent industries i.e. energy-related and upstream O&G + wider geographies i.e. Middle East and emerging economies)
- Deepen capabilities (Upgrade of facilities and service network globally; investing in new fab yard in Myanmar - "near customer, near market" strategy; new milestones in hydro-desulphurisation unit which may pave way for more such projects + upcoming development of crude oil storage and handling facilities, including construction of 5 mega tanks)
- new contracts to come on stream from mid-2015 (project works)
- more plant shutdowns and turnarounds in FY2015 1H (maintenance)
Challenges (actions to address)
- Rising costs (review cost and op. structure - streamlining efforts + consolidate key ops. into Benoi Lane including workers' dorms)
- Intense pricing pressures (exploring ways to incorporate modular fabrication approach on larger scale to expedite proj. execution)
My other side observations of the AR:
- other op. income is quite substantial ($7.1 mil or 71% of bottom line)
> usually not recurring but for PEC's case some are: rental income, training income, income from sale of scrap material, and govt grants and incentives* till expiry?)
> a significant ($1.7 mil) writeback of impairment allowance of trade receivables is, despite non-recurring, a good indicator of mgmt prudence in first impairing the receivables and then good collection ability to recover those amounts.
- current year impairment $1.6 mil of contract-in-progress + $2.8 mil of trade receivables (hope this is one time and maybe even write back upon collection next financial year)