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Interviews with CEOs of S-Chips
31-10-2011, 08:19 AM.
Post: #21
RE: Interviews with CEOs of S-Chips
For this week, it is Lizhong Wheel.

The Straits Times
Oct 31, 2011
EYE ON... LIZHONG WHEEL GROUP
Wheel-maker on the road to growth

Chinese S-chip firm has almost quadrupled its production capacity since listing in 2005

By Jonathan Kwok

Like the roadworthy wheels that it makes, Singapore-listed Lizhong Wheel hopes it has what it takes to last the distance - and achieve long-term growth.

The booming car market in China has given a boost to many knock-on industries and firms, including Lizhong.

The company, which makes aluminium alloy wheels for cars, is on a roll and has almost quadrupled its production capacity since its listing here in 2005.

It reckons it is the largest maker of aluminium wheels in China, and can produce 8.7 million wheels a year. An upcoming plant in Thailand will boost this.

That is nothing to be sniffed at, but the firm's growth has not saved its investors from a roller-coaster ride these past few years.

The firm listed here at 36 cents per share in October 2005 - one of the first few China-based companies to list here.

Things soon picked up, as the enthusiasm over these firms - known as S-chips - rose soon after. Shares in the company, known at that time as China Wheel before it took on its present name in 2008, hit a whopping $1.25 in July 2007.

But things soon took a turn for the worse, as the global financial crisis walloped stock markets and some startling governance failures were uncovered at some S-chips in the ensuing chaos.

That hammered sentiment in the S-chip sector. Lizhong did not escape as its share price tumbled, and its last traded price is 24.5 cents.

The stock is also trading below the net asset value per share of 2.52 yuan or 50 Singapore cents, noted Lizhong chairman Zang Ligen.

'On the other hand, our Shenzhen-listed peer Zhejiang Wanfeng, which recorded similar revenues and earnings for last year, is trading at a price-earnings ratio of 24 times, versus Lizhong at 4.7 times,' he added. Price-earnings is a popular measure of share value - the higher the ratio, the better the valuation.

The firm has a market value of $57.6 million, way below its peak of more than $290 million in 2007. Nowadays, the stock is also plagued by thin liquidity, with only a handful of lots - if any - changing hands daily. Mr Zang would like to see more liquidity for the stock, as 'fair valuations cannot be achieved without enough liquidity'.

He highlighted the fact that in the previous financial crisis, Lizhong remained profitable, though earnings fell by about half from 2007 to hit 53.4 million yuan in 2008. Net profits were 43.3 million yuan in 2009 before almost trebling to 125.8 million yuan last year.

'2008 and 2009 were a challenging period for the whole auto supply chain,' said Mr Zang. Cost-cutting measures helped the firm through, as did its research and development to produce lighter, yet safe and affordable wheels that can improve vehicles' fuel efficiency.

In terms of corporate governance, Lizhong has also set up a management committee since listing to help the board in coordinating, supervising and managing the operations of the firm.

The creation of such a committee is not a requirement by the Singapore Exchange, Mr Zang noted.

Since July 2006, Lizhong has also put in place a whistle-blower policy to encourage staff to report any financial irregularities and illegal activity to the audit committee via e-mail. The committee will protect the identity of these staff.

In the seven years since it listed, Lizhong has not raised capital through the equity market so as not to dilute shareholders' holdings, said Mr Zang.

On the other hand, it has been paying out dividends consistently, except for 2008 and 2009 during the slowdown. There is no fixed dividend policy. Payouts for last year were five fen, while for 2007 it paid out 7.2 fen. Payouts for 2006 were seven fen, and 6.8 fen for 2005.

Mr Zang also emphasised that the firm has always been able to pay off its debt, even in the 2008 to 2009 recession.

The company is rolling ahead with expansion plans. It has six wheel-making plants and one mould plant in China, and started building a wheel plant in Thailand in the middle of last year.

The Thai plant, with an initial capacity of one million wheels every year, will help it augment its overseas presence, selling products to markets such as Europe, and the United States, after starting operations in December. By the end of next year, Lizhong plans to raise the Thai plant's capacity by another 50 per cent.

With most of the major automakers having set up shop in Thailand, the country seemed the natural choice for Lizhong's first overseas manufacturing plant, said Mr Zang. He added that aluminium alloy wheels made in Thailand typically command higher prices in the international markets.

jonkwok@sph.com.sg

This is a series of interviews with the head honchos of Chinese companies listed here.
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07-11-2011, 07:53 AM.
Post: #22
RE: Interviews with CEOs of S-Chips
For this week, it is Memstar.

The Straits Times
Nov 7, 2011
EYE ON... MEMSTAR TECHNOLOGY
Water firm sees good business flow

Apart from producing membranes, it invests in water treatment projects

By Jonathan Kwok

WITH the world's population recently hitting seven billion, many companies reckon that supplying fresh water to meet the planet's growing demand could be a rewarding enterprise.

Singapore-listed Memstar Technology is in a good position to benefit. The company develops and makes membrane products and systems that are used in water treatment, and holds a number of patents for its membranes.

Customers include Singapore-listed United Envirotech and United States- based Doosan Hydro Technology, both of which have water treatment businesses.

Last year, Memstar also began investing in water treatment projects in China, to provide it a recurring and stable earnings base.

And late last month, it clinched a supply deal with US-based Hydranautics, a reputable manufacturer of reverse osmosis and ultrafiltration products which use membranes. Under the contract, Memstar will supply membranes to Hydranautics for use in its products.

Dr Ge Hailin, chief executive of Memstar, called it 'an exciting development' for his company.

As it is the firm's first supply contract to an equipment manufacturer, it means that Memstar could expand its client base beyond water treatment firms.

In terms of corporate governance, Dr Ge highlighted that Memstar has outsourced the internal audit function to consultancy firm Baker Tilly, which reports to the audit committee.

The three members of the audit committee are all independent directors, and the committee meets the internal auditors and external auditors separately, without the presence of the management, at least once a year.

Dr Ge also noted that of the five-member board, three are independent directors - higher than the Singapore Exchange's requirement that one-third of directors be independent.

He stressed that Memstar's management maintains open communication channels with investors and shareholders and attends to queries directly, whether verbal or written.

The company does not have a formal dividend policy but has been consistently paying out dividends since it began trading in 2007 - even through the financial crisis in 2009, said Dr Ge.

The firm paid out 0.04 cent per share for each of the past two financial years ending in June, and 0.02 cent per share for the year ending in June 2009.

Memstar remained profitable on a yearly basis even through the last financial crisis, though it fell into the red for two quarters.

Net profits for the year to June 2009 slid to 10 million yuan (S$2 million), from 23.1 million yuan the year earlier.

Profits in 2009 declined due to the lower sales of industrial, domestic and commercial membrane products as a result of customers reducing or deferring their spending given the economic uncertainty, explained Dr Ge.

'In response, we were careful in containing our costs. As seen from the financials, our business has shown the resilience and tenacity to ride out tough times.'

Memstar's earnings rebounded to 24.2 million yuan for the 12 months to June last year, while it recently reported full-year earnings of 44.1 million yuan for the 12-month period ending in June this year.

'We have quadrupled our earnings in the year ending in June 2011, from the year ending in June 2009,' said Dr Ge.

'This can be attributed to our decision to move upstream by investing in water treatment projects, which contributed revenue of 65.8 million yuan in the most recent financial year. Our primary purpose of investing in these projects is to showcase the use of membrane technology and, at the same time, strengthen the recurring and stable earnings base.'

While many Chinese firms listed here - known as S-chips - have had liquidity dry up and valuations plunge as a host of corporate scandals have plagued the sector, Memstar has survived relatively well, with Dr Ge noting that 'there is still keen interest in the stock due to its unique business'.

Dr Ge and Ms Pan Shuhong, Memstar's major shareholders, are both China-born but the company was founded in Singapore and its membrane technology is developed here.

The firm made the headlines when it debuted here in 2007, when more than one billion of its shares were traded on several daily sessions. At that time, the SGX's systems could not properly display the data when trades exceeded one billion shares, leading to some confusion - though that limitation in the system has since been rectified.

The stock traded a daily average of about 2.6 million shares over the past year.

Memstar closed at 4.5 cents on Friday, giving it a price earnings of about 13.6 - whereas many other S-chips can trade at ratios of two or even lower. Price earnings is a popular measure of share value - the higher the ratio, the better the valuation.

The company's market capitalisation is $119.5 million.

jonkwok@sph.com.sg

This is a series of interviews with the head honchos of Chinese companies listed here.
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My Value Investing Blog: http://sgmusicwhiz.blogspot.com/

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30-09-2017, 09:31 AM.
Post: #23
RE: Interviews with CEOs of S-Chips
6 years on these are interesting articles for reference and evaluation, including one obvious blowup and 2 that's done well
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