Powermatic Data Systems

[TerryT]

I was very much looking forward to the end May reporting. With $30m+ cash equivalent, they can easily double the annual dividends

Instead of which.....nothing. Full Year: https://links.sgx.com/FileOpen/Full_year...eID=623484

Net profit up 25%, profit attributable to owners down 16%.

Kind of unexpected. Nevertheless, I do hope to add some if the share price drop further


I think the profit attributable down 16% you mentioned, was due to fair value changes on equity instruments of $3.376m.


Cash equivalents increases to $39m


"No dividend has been declared/recommended for the financial year ended 31 March 2020. Notwithstanding, as set out in paragraph 10
above, the Board is pursuing a review of the options in relation to the capital structure of the Company which may or may not involve a reduction
of the Company’s capital."

Paragraph 10 - The Board announced on 31 October 2019 that it is reviewing the capital structure of the Company which may or may not involve a reduction of the Company’s capital. In carrying out this review, the Board has had to carefully consider the Company’s capital requirements and how best to achieve a capital structure appropriate to the Company’s requirements. The review is still being actively pursued, including engaging the SGX-ST Regco. The Company wishes to emphasise again that there is no certainty or assurance that any transaction will materialise. The Company will make further announcements as and when there are any material developments in the matter.

[MOV]

The fact that the company is holding its 'fire' means it is serious about giving out a bumper bazooka through capital reduction. 

For years, shareholders have complained about the growing cash pile and I am glad management is taking this step now after accumulating years of reserves through conservative stewardship. I guess management is now confident enough on the rapidly growing wireless business which has been generating solid cash flows.

With cash of $39.233m or $1.12 per share, I expect PM Data to be able to easily give back at least 50cts in capital to shareholders. It would be interesting to see how the market values its wireless business once the cash and property are eventually distributed. 

While others are doing rights issue, drawing down debt lines to support cash-flow during Covid-19 pandemic outbreak, our company is 'troubled' by how much cash to give back. 

[desmondxyz]

The fact that the company is holding its 'fire' means it is serious about giving out a bumper bazooka through capital reduction. 

For years, shareholders have complained about the growing cash pile and I am glad management is taking this step now after accumulating years of reserves through conservative stewardship. I guess management is now confident enough on the rapidly growing wireless business which has been generating solid cash flows.

With cash of $39.233m or $1.12 per share, I expect PM Data to be able to easily give back at least 50cts in capital to shareholders. It would be interesting to see how the market values its wireless business once the cash and property are eventually distributed. 

While others are doing rights issue, drawing down debt lines to support cash-flow during Covid-19 pandemic outbreak, our company is 'troubled' by how much cash to give back. 

In fact, i prefer they give 8 cts dividend first, then another 42 cts capital reduction....

[kikababoo]

Anyone familiar with capital reduction process? I notice their disclosures in the latest FS says they have been in touch with SGX Reg-co? this language wasn't there back in the October announcement.

I'm also surprised why don't they just maintain the dividend first and do a slightly smaller capital reduction later.

[desmondxyz]

Anyone familiar with capital reduction process? I notice their disclosures in the latest FS says they have been in touch with SGX Reg-co? this language wasn't there back in the October announcement.

I'm also surprised why don't they just maintain the dividend first and do a slightly smaller capital reduction later.

If total is the same, the only reason is the boss trying to save on admin cost.....

[weijian]

Here is my layman understanding of capital reduction (been some time since i experienced it):

- The equity of a company is mainly made up of share capital and retained profits (for simplicity sake, we will leave out other portions like reserves, treasury shares etc). Dividends are paid out of retained profits, while capital reduction is paid out of share capital.

- According to Companies Act, one has to apply to the Court to get approval for capital reduction (paying out of share capital). You have to prove that you are solvent even after you distribute out the cash etc etc. A capital reduction also needs to be passed via a special resolution. A special resolution requires minimum 75% of shareholders present and voting.

- So one can't really pay out a large excess of cash from the share capital portion of the equity via dividends (a normal resolution that needs a simple majority). There are some exceptions if your retained earnings are negative though, which was discussed some time back on VB in another thread. I reckon no difference in admin costs if you need a capital reduction exercise to pay out the additional cash.

[donmihaihai]

I believe capital reduction cost more. While cost varies between co. Getting an EGM done easily cost 10K and above and might be a couple of 10K if the co. is willing to spend.

Powermatic Group and Co. lvl B/S especially equity portion says capital reduction make sense if powermatic want to distribute anywhere close to 30M.

[TerryT]

I learned something new today   Fee on SGX side only


Dividend Distribution
Service Fee (Prices are subject to prevailing GST where applicable)
Fixed (admin): $3,250
Variable (processing):  First 5,000: $2.50/record  Next 10,000: $1.875/record  15,001 onwards: $1.25/record  Plus out-of-pocket expenses, if any


Corporate Action (Effect 2008)
Tier 1 – S$3,000 (Capital Reduction)
Tier 2 - S$8,000 (Circulars with multiple resolutions (3 or more) from Tier 1)

[brattzz]

i would invest more into capax now with the cash hoard, rather then distribute out... it just does not make sense to not fully maximize their cash bullets in the next few months... buy a new building/ office property or something... !

[dreamybear]

Instead of which.....nothing. Full Year: https://links.sgx.com/FileOpen/Full_year...eID=623484

Net profit up 25%, profit attributable to owners down 16%.

I think  it may be prudent to factor in a decline in revenue and possibly profit moving fwd, as well as perhaps a 10% decline(estimate) in the valuation of the freehold property due to the covid crisis.

=======

Section 10 (Pg 6) of FY Results (emphasis mine)
"In the midst of such uncertainties, the Group expects the operating environment to remain challenging in the next 12 months. Revenue and gross profit margins are expected to decline as customers whose businesses are badly impacted by Covid-19 are cutting back their orders or deferring their project launches."

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Singapore’s economic situation remains dire, with recovery likely to be ‘slow and uneven’: MAS
https://www.channelnewsasia.com/news/bus...t-12937816