Lee Metal Group

[dydx]

Just taken a glance of the latest very impressive FY10 (ended 31Dec10) AR.....
http://info.sgx.com/listprosp.nsf/6c6be9...2002768be/$FILE/LM_AR10_Lowres.pdf

I was a little surprised by LMG trying to keep a 4-times-a-year dividend payment - total: $0.025/share for FY10 - track record for a 2nd year.

Even though the group B/S has a healthy working cash balance, I feel LMG is borrowing too much for its inventory holding - for 2 years now, the year-end inventory balance was financed 100% by trade finance credits from banks.

I also feel the 3 IDs not good enough for LMG's scale of operation and risks profile.

Any views from fellow forumers on this name?

[cif5000]

Just taken a glance of the latest very impressive FY10 (ended 31Dec10) AR.....
http://info.sgx.com/listprosp.nsf/6c6be9...2002768be/$FILE/LM_AR10_Lowres.pdf

I was a little surprised by LMG trying to keep a 4-times-a-year dividend payment - total: $0.025/share for FY10 - track record for a 2nd year.

Even though the group B/S has a healthy working cash balance, I feel LMG is borrowing too much for its inventory holding - for 2 years now, the year-end inventory balance was financed 100% by trade finance credits from banks.

I also feel the 3 IDs not good enough for LMG's scale of operation and risks profile.

Any views from fellow forumers on this name?

Their reply on quarterly dividend was "since the company has crossed the mark to report quarterly, might as well pay out dividend quarterly."

I am more concerned with the new property business. The cash level, which to me is a good buffer for their trading business, will go down once they grow the property segment. Although that augments the fabrication business, the overall risk for the group will go up. Cash flow will become lumpier and quarterly dividend, if maintained, will come from cash reserves instead of consistent cash flow.

On IDs, I feel that it is best not to need them. i.e. the Executives can stand firmly on their own.

If one compares LMG with BRC, he will find that the profitable trading business has a negative market value.

[yyt]

Just taken a glance of the latest very impressive FY10 (ended 31Dec10) AR.....
http://info.sgx.com/listprosp.nsf/6c6be9...2002768be/$FILE/LM_AR10_Lowres.pdf

I was a little surprised by LMG trying to keep a 4-times-a-year dividend payment - total: $0.025/share for FY10 - track record for a 2nd year.

Even though the group B/S has a healthy working cash balance, I feel LMG is borrowing too much for its inventory holding - for 2 years now, the year-end inventory balance was financed 100% by trade finance credits from banks.

I also feel the 3 IDs not good enough for LMG's scale of operation and risks profile.

Any views from fellow forumers on this name?

hmm dydx-san, i was actually quite disappointed with their 2010 performance.

Considering the low interest rate environment in 2010, developing countries in the ASEAN region(74% where their revenue is from) should provide a solid demand for steel.
http://www.steelorbis.com/steel-news/lat...587361.htm

But rev drop, and so did net profit.

It is LMG style to borrow short terms loans at relatively high interest to finance their inventories, since 2006. Concern is that interest for such short term notes can go up to 8.5%(in 2008).

In the event when demand is low and interest rate is high, I'm not sure they'll be able to maintain similar div payouts without touching their cash reserve.
As pointed out by cif5000, their property dev project will also create additional strain on cash.

But yes, I agree, div payouts is definitely attractive, though sustainability is of a concern. The current div payout of $14m is more than their 2008 FCF and Net profit.

Gross profit margin of ~7-8% and net profit margin ~11% is also a pretty tight range to maneuver the company.

[paullow]

seems that leemetal has been paying out dividends 4x a yr since 2000. wonder will the music ends once the mrt dt line 3 is completed in 2016-7. trading near its nav of 23c giving dividend yiekd of near 10%. a dividend gem?
another steel company hupsteel is a low key but steadily growing its market cap. unlike leemetal, it pays out twice a yr. but nav 32c. trading at 18c. yield 7-8%. a hidden gem?
anyone any views?

[Ben]

I prefer Asia Enterprises. They have unbroken record of profitability since inception, which is more than 30 years already. They have consistently paid out 40% of profits as dividends for the last few years, and the yield at current price is 4%+.

[paullow]

I prefer Asia Enterprises. They have unbroken record of profitability since inception, which is more than 30 years already. They have consistently paid out 40% of profits as dividends for the last few years, and the yield at current price is 4%+.

hi ben, asiaenterprises dividend on low side though track record is there. and agree that its undervalued with nav 32c which is on similar to nav of hupsteel. yet hupsteel trading at 18c n its been around for 70yrs. hupsteel pays dividend yrly since2000. would hupsteel then be an attractive possibility too?

[Greenrookie]

Hi buddies,

Anyone looking at this? was comparing the steel stockists companies when I stumble upon this, look attractive. Here is the "story"

1) 1-off bonanza from Austville EC in 2014
They have a 35% stake in JV with united-engineer, the estimated EPS from this venture alone is expected to be 5.2 cents, almost the whole of 2012 earnings.

2) While global steel market languishes, and its merchandising and trading arm continue to deteriorates with the general markets, its fabrication and manufacturing arm that supply mainly to the construction sector of SIngapore is booming, and is offsetting the poor performance of its trading arm.

3) Its Fabrication and manufacturing arm has a record year in 2012 of 30,064,000 profits

2011, 2010, 2009, 2008, 2007
19m, 22m, 27m, 22m, 4m

Its records appear checkered, and margins ranges from 8% to 11%, but

They are pending JTC approval (by 30 oct)to confirm purchases of 1 Tuas Av8 and 3 Tuas Ave 8, the 2 buildings beside their existing facility to expand their manufacturing arm , this action speaks volume of their outlook of the business. Also 1H turnover for the segment is already 192.6m comparable to 361.6 m for the whole of 2012. Demand is still strong, and growing.

4)HDB will taper off its supply to 15k from 2016 onwards, and the MRT lines will keep the industry busy till 2020.

Land use plan Singapore quote MND plan to add 700,000 housing till 2030 to accommodate 6.9 million, granted it is just a guideline, but the sector does not seem to be going to sharp correction anytime soon.

5) Trading arm is in doldrums, but the lower it is, the less chances for this segment to spring nasty surprises, and this segment is of low margin, so any growth or deterioration will not significantly affect the bottom line.

However, China has talk about consolidating the production of steel mills, (BUt iron ore restocking and import is still at record high for recent years), US housing is showing signs of recovery, Europe is stabilizing.
All these crystal glass gazing might be meaningless, but given steel is a commodity indispensable in urbanization, the better the economic acivities, the higher the demand for steel.

6) Unbroken records of dividends and profitability since listing in 2001. Payout ratio is 30-50%, except in 2005, where payout is only 10%

valuation:
At current prices,
you are paying a premium above NAV
you are paying a forecast PE 6x 2013 and 3-4 times 2014 earnings
Projected Dividend yield of at least 7% in 2013 and 2014

Risks
1) High gearing and expected to continue to increase till to their expansions. Gross gearing is 1.5X of equity due to its high inventory
2) Inventory level is higher than equity (175 million compared to equity of 148 million)

As with the case of HG metals, when crisis hits and heavy inventory writedown + high gearing is a recipe for disaster.

I am comfortable with the risk I am taking, since Steel price is some 30% off the peak, and company is generating FCF for most of the years. Net gearing with its FD included will be about 0.5

If you are interested, you can read about my brief comparison of LEE metals with other steel company at
http://sillyinvestor.wordpress.com/2013/...y-summary/

Or a detailed write up from newbiestock from nextinsight in early 2012

http://www.nextinsight.net/index.php/sto...w-pe-of-4q

[NTL]

Hi Greenrookie,

How about BRC Asia? They are doing Fabricated Steel Structures too. Competitor of Lee Metal in this sector.

Vested in The Competitor of same forward looking property market in Singapore.

*Note: Will study Lee Metal in details myself too.

[Clement]

Hi buddies,

Anyone looking at this? was comparing the steel stockists companies when I stumble upon this, look attractive. Here is the "story"

1) 1-off bonanza from Austville EC in 2014
They have a 35% stake in JV with united-engineer, the estimated EPS from this venture alone is expected to be 5.2 cents, almost the whole of 2012 earnings.

2) While global steel market languishes, and its merchandising and trading arm continue to deteriorates with the general markets, its fabrication and manufacturing arm that supply mainly to the construction sector of SIngapore is booming, and is offsetting the poor performance of its trading arm.

3) Its Fabrication and manufacturing arm has a record year in 2012 of 30,064,000 profits

2011, 2010, 2009, 2008, 2007
19m, 22m, 27m, 22m, 4m

Its records appear checkered, and margins ranges from 8% to 11%, but

They are pending JTC approval (by 30 oct)to confirm purchases of 1 Tuas Av8 and 3 Tuas Ave 8, the 2 buildings beside their existing facility to expand their manufacturing arm , this action speaks volume of their outlook of the business. Also 1H turnover for the segment is already 192.6m comparable to 361.6 m for the whole of 2012. Demand is still strong, and growing.

4)HDB will taper off its supply to 15k from 2016 onwards, and the MRT lines will keep the industry busy till 2020.

Land use plan Singapore quote MND plan to add 700,000 housing till 2030 to accommodate 6.9 million, granted it is just a guideline, but the sector does not seem to be going to sharp correction anytime soon.

5) Trading arm is in doldrums, but the lower it is, the less chances for this segment to spring nasty surprises, and this segment is of low margin, so any growth or deterioration will not significantly affect the bottom line.

However, China has talk about consolidating the production of steel mills, (BUt iron ore restocking and import is still at record high for recent years), US housing is showing signs of recovery, Europe is stabilizing.
All these crystal glass gazing might be meaningless, but given steel is a commodity indispensable in urbanization, the better the economic acivities, the higher the demand for steel.

6) Unbroken records of dividends and profitability since listing in 2001. Payout ratio is 30-50%, except in 2005, where payout is only 10%

valuation:
At current prices,
you are paying a premium above NAV
you are paying a forecast PE 6x 2013 and 3-4 times 2014 earnings
Projected Dividend yield of at least 7% in 2013 and 2014

Risks
1) High gearing and expected to continue to increase till to their expansions. Gross gearing is 1.5X of equity due to its high inventory
2) Inventory level is higher than equity (175 million compared to equity of 148 million)

As with the case of HG metals, when crisis hits and heavy inventory writedown + high gearing is a recipe for disaster.

I am comfortable with the risk I am taking, since Steel price is some 30% off the peak, and company is generating FCF for most of the years. Net gearing with its FD included will be about 0.5

If you are interested, you can read about my brief comparison of LEE metals with other steel company at
http://sillyinvestor.wordpress.com/2013/...y-summary/

Or a detailed write up from newbiestock from nextinsight in early 2012

http://www.nextinsight.net/index.php/sto...w-pe-of-4q

I don't think this can be compared to the stockists. Correct me if I'm wrong, but their trading arm seems more involved in the trading of scrap metal. The end customers in this case are the minimills.

[Greenrookie]

Hi buddies,

Anyone looking at this? was comparing the steel stockists companies when I stumble upon this, look attractive. Here is the "story"

1) 1-off bonanza from Austville EC in 2014
They have a 35% stake in JV with united-engineer, the estimated EPS from this venture alone is expected to be 5.2 cents, almost the whole of 2012 earnings.

2) While global steel market languishes, and its merchandising and trading arm continue to deteriorates with the general markets, its fabrication and manufacturing arm that supply mainly to the construction sector of SIngapore is booming, and is offsetting the poor performance of its trading arm.

3) Its Fabrication and manufacturing arm has a record year in 2012 of 30,064,000 profits

2011, 2010, 2009, 2008, 2007
19m, 22m, 27m, 22m, 4m

Its records appear checkered, and margins ranges from 8% to 11%, but

They are pending JTC approval (by 30 oct)to confirm purchases of 1 Tuas Av8 and 3 Tuas Ave 8, the 2 buildings beside their existing facility to expand their manufacturing arm , this action speaks volume of their outlook of the business. Also 1H turnover for the segment is already 192.6m comparable to 361.6 m for the whole of 2012. Demand is still strong, and growing.

4)HDB will taper off its supply to 15k from 2016 onwards, and the MRT lines will keep the industry busy till 2020.

Land use plan Singapore quote MND plan to add 700,000 housing till 2030 to accommodate 6.9 million, granted it is just a guideline, but the sector does not seem to be going to sharp correction anytime soon.

5) Trading arm is in doldrums, but the lower it is, the less chances for this segment to spring nasty surprises, and this segment is of low margin, so any growth or deterioration will not significantly affect the bottom line.

However, China has talk about consolidating the production of steel mills, (BUt iron ore restocking and import is still at record high for recent years), US housing is showing signs of recovery, Europe is stabilizing.
All these crystal glass gazing might be meaningless, but given steel is a commodity indispensable in urbanization, the better the economic acivities, the higher the demand for steel.

6) Unbroken records of dividends and profitability since listing in 2001. Payout ratio is 30-50%, except in 2005, where payout is only 10%

valuation:
At current prices,
you are paying a premium above NAV
you are paying a forecast PE 6x 2013 and 3-4 times 2014 earnings
Projected Dividend yield of at least 7% in 2013 and 2014

Risks
1) High gearing and expected to continue to increase till to their expansions. Gross gearing is 1.5X of equity due to its high inventory
2) Inventory level is higher than equity (175 million compared to equity of 148 million)

As with the case of HG metals, when crisis hits and heavy inventory writedown + high gearing is a recipe for disaster.

I am comfortable with the risk I am taking, since Steel price is some 30% off the peak, and company is generating FCF for most of the years. Net gearing with its FD included will be about 0.5

If you are interested, you can read about my brief comparison of LEE metals with other steel company at
http://sillyinvestor.wordpress.com/2013/...y-summary/

Or a detailed write up from newbiestock from nextinsight in early 2012

http://www.nextinsight.net/index.php/sto...w-pe-of-4q

I don't think this can be compared to the stockists. Correct me if I'm wrong, but their trading arm seems more involved in the trading of scrap metal. The end customers in this case are the minimills.

If the products on their website is any guide, I dun think its scrap metals. But I agree it cannot be compare to stockists

I am rather concern about store and distribution model of business of stockists. It's trading arm has margin of below 2%, the worst compare to all stockists, so I believe lee metals trading arm is really trading, more of transisting orders than distributing.
(My guess only, might be wrong)
I kinda of change my mind as I go from one company to another. BRC Asia is a better comparison like What NTL pointed out. Will look at that more closely. But the trading arm performance really mirrors that of other stockists