AP Oil

[GenS70]

If there was an intent by the Ho family to privatise the company, I think they may have missed it. The very low valuation over the past 12 months would have made a half-decent offer look good, but it didn't happen. Instead, they have increased dividends have increased by 50%. This will likely cause the share to trade at a higher price, which will only make it more difficult to for the Ho family to privatise cheaply. So I don't think there is an intent to privatise the company, at least for now.

AP Oil's years of low dividend payout ratio has been a sore point for opmi. The increase in ordinary dividends, and not the provision of a special dividend, may mean that the company intends to maintain a 0.75 cents payout on a recurring basis. After maintaining 0.5 cents for the previous decade, the company is showing progress by initiating (and possibly maintaining) 0.75 cents for the new decade.

A 0.75 cents dividend is only about half of their FY19 earnings -- earnings which have been lowered by increased competition for the past 3 years. Assuming that the company is able to maintain or improve its FY19 performance, there should be no problems maintaining a 0.75 cent dividend.

Indeed the company's market value is sitting on its cash balance. But an exceptionally large excess cash balance does not serve the shareholders. Now that the company is close to completing the renewing of its plant and lease at 18 Pioneer Sector 1 -- which has used up a meaningful portion of its cash balance --  the remaining cash balance should be unencumbered against future (planned) expenditures. Will the Board return some of this cash to shareholders, or will they continue to look for ways to invest it?

While a return of cash to opmi is welcome, the more possible driver of shareholders returns is likely to be from the higher production capacity of its renewed plant. If the CEO's optimism and confidence -- from the FY18 AR -- is not misplaced, the results should be apparent in FY20 results.

The covid-19 situation may well provide a boost to the sales of GB Chemicals' sanitiser, disinfectant, and detergent products. But since their sales are to industrial/business customers, and not consumers, the results may be mixed. Depending on the impact on their customers, and corresponding their response, some establishments may have a heightened cleaning schedule, while others may have less of a reason to clean due to lower business activity. Regardless of whether GB Chemicals will benefit or otherwise, this is probably a one-off event. The more important question is whether the Board has plans to grow GB Chemicals (and the other subsidiaries) meaningfully in the future.

not sure if you guys miss it, AP oil pays 0.75c in FY2016 as well, but reduce it to 0.5c in FY2017. Other than that the rest of the decade pay 0.5c