CDW Holdings - Brightening your Sharp screens

CDW Holdings (D38.SI) - Brightening your Sharp screens

For this month, I have decided to do a post on CDW Holding Limited (current price 0.192). [CDW is a Hong Kong-based investment holding company. The Company focuses on the production and supply of niche precision components for mobile communication equipment, gamebox entertainment equipment, consumer and information technology equipment, office equipment and electrical appliances. The Company operates in three segments: LCD backlight units, Office automation, and LCD parts and accessories. LCD backlight units segment is engaged in the manufacture of liquid crystal display (LCD) backlight units for LCD modules. Its Office automation segment is engaged in manufacture and trading of parts and precision accessories for office equipment and electrical appliances. Its LCD parts and accessories segment is involved in manufacture and trading of parts and precision accessories for LCD modules.

This Japanese controlled company (>50% owned by MIKUNI CO., LIMITED), operating out of Hongkong but listed on SGX has been around for quite a while. It has also been rewarding OPMI with steady dividends for quite a while. Recent half-yearly results shows that they will be doing their USD0.5c interim div payout. Earnings have also been good so far at USD1.22c for this quarter and USD1.55c for first half. It seems the investment they made previously for a new factory production line for backlight units has been profitable, though revenue has declined a bit compared to same quarter last year. Once again let's have a quick look at it's overall current valuation, in simple BlueFund fashion.

Market cap : 93 million
NAV : $0.205
Price : $0.192 (7% discount to NAV)
Net cash :  85.57 million (72.04% of Market Cap)
Dividend yield : 8.33% (based on USD 1.2cents)

Being a company that operates based in hongkong and factories in China, one could almost classify this as an S-chip. However, this company was founded since 1991 and still largely owned by Japanese. Other than a one time fiasco few years back with a wayward Chinese employee trying to embezzle the company's cash stored at a china bank, which was discovered and monies recovered, management has been running the company well and has been quite generous with dividends. Personally I have communicated with the company and have received email replies from top management, so this gives me some confidence that they are an ok bunch and that the cash that they have is really sitting there in the banks.

Business wise, it is dependent on a big customer in Japan, which they have kept secret due to privacy concerns, but I am guessing it is SHARP which supplies displays to Sony and Nintendo (pretty obvious from the picture of a PS Vita and Gameboy on the products page). Sony does use screens for their products from different manufacturers and SHARP is one of them. The recent report by RHB about a new line of displays released in June vs those of rival JDI(Japan Display) also points to the  major customer being SHARP.

In the end, the fortunes of CDW are very tied to it's main customer for now. Management has indicated they will try to diversify their income stream to other customers. Lets hope they get a contract from JDI(Japan Display), which must be profiting from supply screens to the millions of Iphones and Galaxy S's out there.

Will be accumulating on any dips.

[author holds shares in this company]

UPDATE : Sharp is trying to sell its LCD business off likely to Japan Display. This either means loss of supply contract and business to Sharp or an influx of orders from JDI for new iPhones.

UPDATE April 2016 : SHARP has just been sold to Hon Hai Foxconn the famed Iphone manufacturer for Apple. With a new factory set up in Blangadesh and mention of a Taiwanese partnership (which could be Foxconn) that has developed new light guides, it looks like business at CDW might be ramping up soon.