Personally, I was not happy to see them investing $6mm in bonds especially as we do not know the credit quality of the bonds nor whether these are structured bonds. I always get very uncomfortable when I see treasurers/ CFOs deciding to become portfolio managers. That is not their area of expertise. They should either invest the cash in the business or return it to shareholders. If they need the liquidity, they should deposit it with a bank. No / low interest rate is better than potential losses....
With the Yong brothers still holding a combined approx. 60.3% interest in Nam Lee, and the 3 IDs being experienced and conservative people, and the General Manager and Financial Controller both are qualified accountants and tested, proven employees, I will be very surprised if Nam Lee would throw away $6.155m of its $41.6m (as at 31Mar13) net cash reserve into some 'dud' bonds.
As for the 15% drop in Revenue and 20.1% drop in PBT in 1Q, Nam Lee's management has said that it is "mainly due to a decrease of sales volume in aluminium industrial products" - i.e. orders from Carrier Transicold for customised aluminium frames (used to mount the refrigeration units in reefer containers) have fallen, in line with the current weakness in global shipping and goods trade. For this we have to bear in mind that Nam Lee has been the sole supplier of the aluminium frames to Carrier Transicold for a long time now (more than 10 years?), and the working relationship between the 2 has been tested by many 'up and down' cycles in container shipping. When container shipping recovers or booms again, Nam Lee will have to ramp up production and will enjoy good volume-driven gains; when orders from Carrier Transicold are down, Nam Lee will have to rely more on the construction industry (including HDB's building programme) in Singapore. I should add that this rather smart strategy has worked very well for Nam Lee over all the years. In fact, orders from Carrier Transicold provide Nam Lee a steady base load in running probably the largest of such metal forming capacity in Singapore/South Malaysia, and enable Nam Lee to quite comfortably cover a big portion of the group's total fixed costs. This also allows Nam Lee to operate more comfortably in the very competitive local construction industry, by focussing on better or higher-margin projects from better-quality developers or main-contractors.
I should also add that there is evidence that the trading relationship between Nam Lee and Carrier Transicold is a very special one designed like a long-term business partnership based on true mutual interests. In FY12 (ended 30Sep12), Nam Lee suffered $1.661m in net forex loss, and a big portion of that amount was reimbursed by Carrier Transicold. Based on my experience, this has rarely happened in other companies.
One thing is quite certain, when global container shipping recovers, Nam Lee's factories will again be churning out many more aluminium frames for Carrier Transicold. Meanwhile, the orders and volume would be smaller and limited to just replacement of old reefer containers. Whatever it is, reefer containers are crucial for shipping of foodstuff (meats, bananas, etc.), and Carrier Transicold as the clear global leader should remain a volume champion for many years to come.
this buying of bonds with excess cash seems to be happening in another conservatively generation pass down to generation, cash rich company, sin ghee huat, with the reason given to increase the returns for their cash. no mention what sort of bonds.
Hi dydx,
One thing that bothers me more than falling profits is precisely nam lee contract with carrier. Their contract will expire 2014, but there is no update of renewal o contract. I am a but more assured after reading what u wrote. But nam lee investor relation is definitely sub par I terms of sharing of info.
This will always be a thorn as it drags on. I dun work I. The metal industry, but what nam lee supplied to carrier is essentially the casing, I doubt seriously nam lee as a inreplacable supplier.
the profit in recent report helped greatly by foreign exchange gain vs forex loss in the previous FY. excluding such non-operation item, P&L would be quite ugly compared to previous FY.
Guys i just noticed Namlee traded as low as 10cent-12cent during GFC period. Would it not be more prudent to just wait till share price less than or equal to cash before considering this company?
I would think the only argument for owning it now at this full valuation is only if you want to have a punt that management will go crazy and issue bonus DIV!
(15-05-2013, 11:28 PM)freedom Wrote: [ -> ]the profit in recent report helped greatly by foreign exchange gain vs forex loss in the previous FY. excluding such non-operation item, P&L would be quite ugly compared to previous FY.
I see 1H 2013 has less Fx gains than 1H 2012
I see 1H 2013 has less fair value gains than 2012
I see 1H 2013 paid more tax than 1H 2012
EBIT - its down 20%
(16-05-2013, 10:00 AM)Salty Wrote: [ -> ] (15-05-2013, 11:28 PM)freedom Wrote: [ -> ]the profit in recent report helped greatly by foreign exchange gain vs forex loss in the previous FY. excluding such non-operation item, P&L would be quite ugly compared to previous FY.
I see 1H 2013 has less Fx gains than 1H 2012
I see 1H 2013 has less fair value gains than 2012
I see 1H 2013 paid more tax than 1H 2012
EBIT - its down 20%
are we reading the same financial report?
in pg2 their note to P&L statement. It is clearly stated that 31 Mar 2013 had forex gain of 368K and 31 Mar 2012 had forex loss of 1,187K.
if you removed the forex loss from FY 2012 and gain from FY2013, operating profit figure would be 6.3 M for 1H FY13 compared with 9.7 M for 1H FY12. I would say quite ugly, but YMMV.
(16-05-2013, 09:55 AM)BlueKelah Wrote: [ -> ]Guys i just noticed Namlee traded as low as 10cent-12cent during GFC period. Would it not be more prudent to just wait till share price less than or equal to cash before considering this company?
I would think the only argument for owning it now at this full valuation is only if you want to have a punt that management will go crazy and issue bonus DIV!
Almost every counter trade at ridiculous low price during GFC, blue chips included. Ocbc is trading at 3.9 at one point iirc. Of course u can wait for sales to come before buying anything. But there is opp cost involved too if u only do crisis investing. When sales time come, I will be scoping blus chips instead. Those that brought reits during GFc are sitting on yields as high as 20%.
Even if a crisis does come, would have
1) the courage to buy, not knowing if the bottom is near ?
Back to NL, where it is definitely not a sizzle growth stock, it is not actually fully valued. Not many companies can boast of a av. FCF per shares of 5 cents (7 times price) (av of last 6 yrs)
easier said than done.
when a real crisis, i bet many of us would not have the guts to scoop at ultra low price..