Sunday, October 16, 2016

Multi-Chem Limited - Helping Asean stop a bunch of hackers.

Multi-Chem (AWZ.SI) - Helping Asean stop a bunch of hackers

As the market has been more or less trading sideways, there has not been much action on my blog. However this stock has been brought to my attention recently due to their rising amount of net cash. Let's have a look at Multi-Chem, current price $0.52

[Established in 1985 as a small distributor of PCB chemicals and materials, Multi-Chem is now a leading drilling service specialist and a major distributor of specialty chemicals and materials to PCB manufacturer in the region.

In May 2002, we diversified into the business of IT distribution where we focus on best-of-breed internet security, WAN optimisation, network management and video conferencing products from industry leading vendors. Through Multi-Chem’s subsidiaries under the M.Tech umbrella, our IT business has expanded in both product range and geographical coverage since inception and now spans Singapore, Australia, China (including Hong Kong), India, Indonesia, Japan, Korea, Malaysia, Myanmar, New Zealand, Philippines, Taiwan, Thailand, United Kindom and Vietnam. We started IT training business in Singapore in late second quarter of 2004 to complement the IT distribution business. We are currently authorised to conduct training for Allot, Blue Coat, Check Point, Solarwinds, MobileIron and Nutanix courses.

Business wise, it seems the company is still running its original PCB related business. However that is now only contributing less than 10% of its total revenue in recent years. In AR2015, revenue from PCB segment was 25.621m vs. IT segment of 321.436m. Given this we can see that Multichem has evolved into an IT company, more specifically one that is in the IT security distribution business. How solid is the distribution business? I don't know. How secure is this business? I don't know either. But it does seem that the different software companies are happy to work with MultiChem in distributing their products and follow-up with end users with training and maintenance. This bodes well going forward as IT security will continue to be in demand as Singapore and other nations in ASEAN move towards more technology based economies.

Ok enough about the business, now the valuation, BlueFund Style:
Market cap : 46.85 million
NAV : $0.9827
Price : $0.52 (47% discount to NAV)
Debt : 25.407million
Net cash :  44.574 million (41.34% of MCap)
Dividend yield : 6.37% (based on 0.331 past 2 years, increased from 0.11 before. FY15 EPS was 5.3c)
Daily Volume : What volume?

Valuation looks pretty good at current price which has recently bumped up due to cum dividend. Their historical div payout has been stable and reasonable as well.

Management looks like a nice bunch. Of note, the Executive director is an engineering grad from NUS who is spearheading their expansion into IT security sector in Asia and this has been their main growth engine as PCB related business has stalled. Boss has also done a buy-in at 52cents recently. Shareholdings wise boss, his wife collectively own ~68%, add in a Thai investor who owns ~12% and we have the top 3 shareholders owning close to ~80% of the company. Hence not much free float or daily volume. Trading at such a steep discount to NAV, the likelihood of a privatisation or sale of the company is very much increased.

[author holds shares in this company]