16-11-2016, 10:46 AM
(16-11-2016, 12:53 AM)BlueKelah Wrote:(15-11-2016, 10:01 PM)sgmystique Wrote: Innotek seems to be getting back on the path to profits under Mr. Lou Yiliang who was appointed on 2 November 2015, as Executive Director of the Group and Chief Executive Office ("CEO") for Mansfield Manufacturing Company Limited ("Mansfield"). This stock was once a favorite for yield lovers having given out dividends of 5 cents every year (from 2008 to 2011) and then dividends of 1 cent for 2012 & 2013 before stopping them from 2014. The company had a large cash balance which allowed them to pay out these dividends inspite of being loss making since 2011.
The pertinent numbers for 9M16:
Revenue: $159.352 mil
Net Profit: $6.812 mil (with NP in 3Q16 being $5.017 mil)
No. of shares: 223.835 mil (+ 22.821 mil being held as treasury shares. These were bought back at prices well above the current share price)
EPS: $0.0304 (for 9 months)
NAV: $0.529
Current Assets - Total liabilities: $54.381 mil
Cash on hand: $22.019 mil
Short term debt: Nil
Long term debt: $0.077 mil
Current market cap: $49.24 mil (At today's closing price of $0.22)
Innotek is practically a zero debt company. If they are able to keep up the performance moving forward this stock could provide decent returns for its shareholders both in terms of a restart of dividends as well as a turnaround in the share price as well.
Look forward to viewpoints from other Valuebuddies who may be tracking this company.
had a quick look,
whilst valuation looks good, profit has had a big jump and there are a few questions that need to be answered.
1) Revenue has been quite flat, this past year, it seems profit comes mainly from cost of sales being much lower than last year. What if metal price spike? I read that China is now consolidating 10 tangshan steel makers into one big company and curbing output like they did for coal.
2) what are they doing with investment securities, its not core business...
ahh. too tired liao...
Few thoughts on the points you have raised:
1) Revenue has been quite flat, this past year, it seems profit comes mainly from cost of sales being much lower than last year. What if metal price spike? I read that China is now consolidating 10 tangshan steel makers into one big company and curbing output like they did for coal.
Yes profitability has increased solely based on the cost of sales being much lower than last year. This is due to (a) Inventories recognised as an expense in cost of sales being around $4 mil lesser than the corresponding 3Q15 while revenues decreased by around $3 mil (b) Depreciation was lower by around $0.6 mil © Wages and salaries being lower by around $3 mil as compared to the corresponding quarter last year.
Metal prices spiking will obviously lead to an increase in costs which might dent their profitability going forward unless they are able to pass on the increased costs to their customers. This is something I currently have no visibility on.
But what I am more enthused by is their increase in productivity with the Q3’16 wages and salaries lower mainly due to a decrease in direct and indirect labor headcount (September 2016: 3,015, September 2015: 4,128) and reduction of overtime expenses. Retrenchment cost was S$0.4 million for Q3’16 and S$1.6 million for 9 months ended 30 September 2016. Assuming status quo being maintained on all fronts moving forward they should have the benefit of not having to pay any retrenchment costs as well.
2) what are they doing with investment securities, its not core business...
Innotek has been investing their excess cash into investment securities for some time though it is not their core business. They managed to get out of Sabana REIT in 2Q15 with some profits. The Board has approved to change the Mandate towards a higher mix for bonds in Q2’16 to reduce financial risk due to the volatility of the global equity markets. This should hopefully keep their capital safer. Of course one would be more comfortable if they could just use these resources in their core business or return excess cash to shareholders!
Anyways I look forward to their Annual Results in Feb next year to see if they are able to maintain the $5 mil profitability per quarter. Seeing the trend for the last few quarters since the new ED has taken over I am quiet hopeful of better times to come.
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