XMH Holdings

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(24-03-2016, 04:22 PM)CY09 Wrote: Hi Cityfarmer/other VB "analysts",

Any new views on XMH after completion of its HQ? From my own calculation, 9M ops Cashflow before WC changes seems to be strong at 8 mil, and if we were to estimate 2mil of annual capex, the company is likely to generate FCF of about 7 mil, after interest and taxes paid. That's about 15% FCF yield at current market cap. Of course, the key assumption is that there will be no deterioration of its  key components which will affect cashflow and P&L. The area I am interested in is its backup generator business.

What's your view on the industry outlook and how will it affect XMH?

Interested and monitoring.

Ops, it seems that I have missed the post. I have a write-up on XMH, after the last AR2015. I share in my next post
“夏则资皮,冬则资纱,旱则资船,水则资车” - 范蠡
I reckon, XMH is rationale to be analyzed in two (2) parts, one is the XMH distribution business, the other is the newly acquired MPG and Z-Power businesses.

MPG was acquired in 2013, with a price tag of $17.4 million, and paid half in cash, and the rest in equity. The valuation PE then, was about 10. Z-Power was acquired in 2015, with a price tag of $12.8 million for the 80% shares, and paid full in cash. The valuation PE then, was about 8.

Main synergy values of the two acquisitions, as in the acquisition proposals, are
- Revenue enhancement via cross-selling
- Cost saving via operational synergies

Are the synergy values materialized? Based on the report on FY2014/15, revenue enhancements have been very successful. MPG revenue was $23 million pre-acquisition, and was $43 million in FY2015, which is almost doubled. Net profit has also doubled over the same period. Z-Power has performed even better after the biz was integrated based the 2-months result in FY2015.

How about the cost saving? The profit margins in FY2014/15 were squeezed by a doubled in admin expenses after MPG and/or Z-Power businesses were integrated. The cost saving by operational synergy, will take more time to materialize. The company has shifted its HQ to Tuas new office in Feb 2016, with all businesses under one roof. I reckon the cost saving will start and improve the net profit margin in near future.

XMH distribution business has been impacted by slower sales in Indonesia, due mainly to lower commodity prices, and the currency Rupiah. The distribution business still remains profitable, but halved in revenue, after factoring in the forex. The serving business fared better, with more jobs on maintenance, repair, and servicing of old vessels. The outlook remains bleak, but likely at bottom already.

One important point to note, is the net gearing ratio of about 77%. The company has a debt of $60 million. The debt has been mainly used in the construction of new Tuas office. The debt is mainly secured by the new office property, thus mainly a mortgaged loan.

How should we value the company? It is not an easy task. MPG and Z-Power businesses combined net profit in FY2015, was $7.6 million (Z-Power net profit was extrapolated based on the 2-months result and 80% shares). A conservative valuation of 8 in PE ratio (which is the same valuation given during acquisition), will give a valuation of $61 million or $0.55 per share.

The XMH distribution business is still profitable, thus shouldn’t worth nothing. A valuation of 10 in PE ratio is suitable, due to the following considerations
- The bleak outlook of marine sector, in a cyclical down, rather than a structural one. It is likely the business is at a bottom.
- The likely cost saving from the operational synergy, after shifted to the new Tuas office.
- The net gearing ratio, but mostly a mortgage loan.

The XMH distribution business FY2015 net profit was $1.2 million, an additional value of $12 million, or $0.11 per share should be added.

Total value now should be around $0.66 per share, a minimum valuation as of now, IMO.

What do you think? All comments are welcomed.

“夏则资皮,冬则资纱,旱则资船,水则资车” - 范蠡

Another company stuck by the doldrums of an oil & gas support industry; with an impending impairment (non-cash by nature) hitting its NAV.


While looking through its recent 9M FY17 statement, the company's cash flow generation ability has fallen from 8.3mil to that of 2.98 mil (about 2.6 cents per share). Netting off interest expense and ordinary capex, FCF generation ability stands at about 1.3 cents. At current price of 26.5 cents, the company is trading at about 5% FCF yield.

The downside is its increasing debt load which hopefully the company can use its cash reserves to pay off. The other downside is the fall in revenue and GPM (25% to 21%).

Another company I am keeping my eyes on still and appreciate any comments on its near term outlook
It looks like an okay business that is affected by downturn in the industries it is serving. But what investors should pay more attention to is the debt it carries. $70m of debt against $56m of book value. With only $19m cash, it is unlikely to be able to reduce its gearing to a safer level without selling off some of its PPE. But this is also unlikely because the PPE's are worth less in this market condition. The likely game plan for management is to continue BAU until the industry recovers, creditors default, or bankers recall loans. What else can they do? As I don't have any insights into the future of oil and gas, and as XMH ability to service its loans is questionable, I choose not to risk the possibility of total loss even though its valuation is attractive. XMH may well recover to its previous prosperity if oil and gas does recover before it goes bust.
Based on 9-month report, more than half of the debt, is the mortgaged loan on new factory building and land. The PPE book value is about  74 million, mostly the building and land (~80% of the value). The LTV is estimated about 60-70%. The weighted effective interest rate, based on AR2016, is about 1.7%.

XMH new project-based biz, is working-capital intensive model, unlike the previous distributor biz model. The debt level changed from net cash to net debt in recent years, even after adjusted the mortgaged loan. The current ratio, is probably the key metric to watch, rather than overall debt/equity ratio, IMHO
Whether one looks at XMH's current ratio (of about 1.3; $84m/$65m) or debt/equity ratio, its financial health is just as worrying.

As XMH expanded at the peak of the industry cycle, its PPE is likely to generate low rates of return in the near-to-mid term.
(12-06-2017, 07:16 PM)karlmarx Wrote: Whether one looks at XMH's current ratio (of about 1.3; $84m/$65m) or debt/equity ratio, its financial health  is just as worrying.

As XMH expanded at the peak of the industry cycle, its PPE is likely to generate low rates of return in the near-to-mid term.

The bulk of PPE, is its building and land, which bought and built at the low (or lowest) of the property and construction cycle  Big Grin
XMH posted a loss for FY17 and 4Q17 due to a $2.6m impairment on intangibles. If the impairment was not done, XMH will have ended the year (barely) positive. A final divided of $0.005 was proposed.


It now has slightly more debt against an unchanged book value compared to previous quarter; $75m debt against $56m book value. The good news is that there is a slight improvement to its current ratio; from about 1.29 to about 1.38. Its $25m of cash and $23m of receivables should be able to meet its $35m current loan obligation. So it's not going bust anytime soon.
XMH maintains order-winning momentum, total orderbook grows 22% to S$54.1 million

* The majority of the orderbook is expected to be delivered within FY2019
* Group continues to tap into new markets and riding on rising opportunities in existing markets especially for marine vessels
* The Group will remain vigilant and seek to broaden its reach in the region to regain footing lost during the marine and offshore downturn

More details in http://infopub.sgx.com/FileOpen/XMH-Pres...eID=525072

First Quarter Financial Results for the Period Ended 31 July 2018 ("1QFY2019") : http://infopub.sgx.com/FileOpen/XMH-%20R...eID=525070
Specuvestor: Asset - Business - Structure.
Notification of Inclusion on the Watch-List Due to the Minimum Trading Price Entry Criterion

Singapore Exchange Securities Trading Limited (the "SGX-ST") has notified the Company on 4 June 2019 that the Company will be placed on the watch-list due to the MTP Entry Criterion with effect from 6 June 2019 pursuant to Rule 1311(2) of the Listing Manual of SGX-ST.

The Company must take active steps to meet the requirements of Listing Rule 1314(2) within 36 months from 6 June 2019, failing which, the SGX-ST would delist the Company or suspend trading in the Company’s shares with a view to delisting the Company.

Listing Rule 1314(2) and Practice Note 13.2 states that the Company will be assessed by the SGX-ST for removal from the Watch-list if it has remained on the Watch-list for at least 6 months and records volume-weighted average price of at least S$0.20 over the last 6 months prior to the date of the SGX-ST’s review.
Specuvestor: Asset - Business - Structure.

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