Lee Metal Group

[yyt]

Just taken a glance of the latest very impressive FY10 (ended 31Dec10) AR.....
http://info.sgx.com/listprosp.nsf/6c6be9...2002768be/$FILE/LM_AR10_Lowres.pdf

I was a little surprised by LMG trying to keep a 4-times-a-year dividend payment - total: $0.025/share for FY10 - track record for a 2nd year.

Even though the group B/S has a healthy working cash balance, I feel LMG is borrowing too much for its inventory holding - for 2 years now, the year-end inventory balance was financed 100% by trade finance credits from banks.

I also feel the 3 IDs not good enough for LMG's scale of operation and risks profile.

Any views from fellow forumers on this name?

hmm dydx-san, i was actually quite disappointed with their 2010 performance.

Considering the low interest rate environment in 2010, developing countries in the ASEAN region(74% where their revenue is from) should provide a solid demand for steel.
http://www.steelorbis.com/steel-news/lat...587361.htm

But rev drop, and so did net profit.

It is LMG style to borrow short terms loans at relatively high interest to finance their inventories, since 2006. Concern is that interest for such short term notes can go up to 8.5%(in 2008).

In the event when demand is low and interest rate is high, I'm not sure they'll be able to maintain similar div payouts without touching their cash reserve.
As pointed out by cif5000, their property dev project will also create additional strain on cash.

But yes, I agree, div payouts is definitely attractive, though sustainability is of a concern. The current div payout of $14m is more than their 2008 FCF and Net profit.

Gross profit margin of ~7-8% and net profit margin ~11% is also a pretty tight range to maneuver the company.