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The liquidation value of inventory and the gross profit margin are linked to the amount of "value-add" of the products. The value-add may come directly from the processing by the stockist who has manufacturing facility or simply from the risk of carrying the inventory.

Think in terms of a per unit weight basis. The more unprocessed a finished product is the better the liquidation value (lower risk). Comparing between a steel plate and a flange of a certain dimension, the flange requires higher skilled labour, more precise machining, costlier storage, etc. That sort of justifies the higher GPM. However, liquidation of steel stockists does not have to go through the auction-type fire sale. The lowest price one can get is the scrap value (check out Union Steel website). In scrapping, the value-add does not count - only the weight counts. Assuming the worst price, if we were to liquidate Sin Ghee Huat and the other stockists, Sin Ghee Huat inventory would have a greater discount than e.g. HG Metal, against the value that is carried on their books. Of course, other stockists of similar products may buy over the inventory at better prices, but to be absolutely conservative don't count on that.

It's a three-factor problem.
1. Liquidation value
2. Earning
3. Price

Better earning accompanies lower liquidation value, and vice versa. If the price compensates for either one or both, then the stock could make one good investment. We have witnessed one of the most, if not the most, volatile steel price fluctuation in the past few years. Stockists in Singapore generally came out unscathed except that they became more cautious. HG Metal aggressiveness eventually caught up with them but that's more of an exceptional case, I think. As long as the balance sheet is not overly stretched and the company is not thinking of gaining market share, the "oligopoly" business environment can allow for many more good years. The average of the good and bad years should give an indication of the, well, average earnings. If we assume just the average earning forward, I don't think it is important to know where the steel price is going to be. Unless one is anticipating a rise in steel price will result in a better reported profit and then a better sentiment to push up the share price. Alternatively, get those stockists with good payout ratio to receive the regular dividends as investment returns.

Just my thoughts. I might be totally wrong.
Sin Ghee Huat has released it's 1st quarter financial result ended 30 SEPTEMBER 2010.

Management's comments for the next reporting period and the next 12 months :

The price of nickel, a key determinant of stainless steel prices, was on the upward trend during 1Q2011, and still appears to be on the rise so far. However, this has not translated into tangible price increases for our stainless steel products, as competition is keen amidst the price volatility in the market. Buyers are cautious with their orders. Nevertheless, the Group maintains a healthy order book, and will continue to strive for a balanced sales and contribution mix of the products. The directors expect the 2Q2011 to show improvement over Q2011, and the current financial year to remain profitable.

For more details. please see the financial result



Just received dividend from Sin Ghee Huat. Feeling great. Smile
what is the roe for this?
FY : 2006, 2007, 2008, 2009, 2010
ROE : 21.5%, 28.3%, 16.6%, 1.7%, 4.4%
FY11 (ended 30Jun11) full-year results just out and makes interesting reading.....
http://info.sgx.com/webcoranncatth.nsf/V...60035406F/$file/SGHresults20110630Q4.pdf?openelement

SGH's well-established and managed stainless steel stockist business had a better year in FY11. Apart from a higher NP, the business generated an after-tax FCF (before accounting for changes in working capital items) of $5.813m, equivalent to $0.0262/share (based on the 222.0m outstanding issued shares). After funding capex of $1.231m, SGH is paying out nearly all of the remainder cash profit of $4.582m as Final/Special dividends totalling $0.02/share (same as FY10's total $0.02/share). This is a great yield and return when compared with SGH's last done share price of $0.215!

Would the latest results and great dividends motivate Mr Market to price SGH fairly, bearing mind the latest NAV of $0.392/share and cash reserve of $36.356m - equivalent to $0.164/share - together provide a lot of asset and cash backing?
HUPSteel has just released its FY11 (ended 30Jun11) full-year results.....
http://info.sgx.com/webcoranncatth.nsf/V...70032F173/$file/4QFY11_result_announcement.pdf?openelement
which makes good comparison with that of SGH.

Just comparing the 2 based on annual dividend payout (HUPSteel's $0.01/share vs. SGH's $0.02/share), against their relative share prices (HUPSteel's $0.19 vs. SGH's $0.245), it is quite clear that SGH still offers a better return. I suppose that's the main reason behind the $0.03 - or a cool 14%! - advance in SGH's share price to $0.245 today.
(25-08-2011, 06:11 PM)dydx Wrote: [ -> ]HUPSteel has just released its FY11 (ended 30Jun11) full-year results.....
http://info.sgx.com/webcoranncatth.nsf/V...70032F173/$file/4QFY11_result_announcement.pdf?openelement
which makes good comparison with that of SGH.

Just comparing the 2 based on annual dividend payout (HUPSteel's $0.01/share vs. SGH's $0.02/share), against their relative share prices (HUPSteel's $0.19 vs. SGH's $0.245), it is quite clear that SGH still offers a better return. I suppose that's the main reason behind the $0.03 - or a cool 14%! - advance in SGH's share price to $0.245 today.

The dividend for Hupsteel should be 1.5 cents instead of 1 cent!!

Right, HUPSteel actually pays out a total $0.015/share in 3 dividends this FY11. So based on their respective last done share prices, both HUPSteel and SGH are now giving a highly respectable dividend yield of close to 8%p.a., with SGH's approx. 8.2% still slightly ahead of HUPSteel's approx. 7.9%.
nice to hear both hupsteel and sin ghee huat are doing fine...i am vested with hupsteel when it was called hup seng huat then...both counters' name ends with the word 'huat ah'!
Payment date for the $0.02/share Final+Special dividends has been fixed for 15Nov11....
http://info.sgx.com/webcorannc.nsf/Annou...endocument
'XD' date has been fixed on 31Oct11.
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