CDW Holdings (BXE.SI) : Another big round of share buy backs.

CDW Holdings (BXE.SI) : Another big round of share buy backs.

Massive share buy back exercise ongoing after Q3 results. so far hit 1.33m+ shares liao. Ongoing in a big way today as well. It is still trading around 97% net cash value @ 0.255 price, though price has gone up roughly 10% from 22c levels a couple weeks ago.

I vaguely remembered that they did do some big buybacks in 2012. So went back and had another look. Indeed they purchased 19,229,000 out of the authorized 47,748,000 shares from Oct 2012 right till the beginning of Jan 2013. This was later given out mostly as employee stock options to management. Some getting as much as 2m+ shares. The share price was pushed up 50% during this exercise. Treasury shares got boosted to 44,632,000

This time round, the authorized number is 23,745,700(which is about the same as last time, factoring the 2:1 share consolidation. So far as of closing last friday, company has bought back 1,332,300 only. Treasury shares stand at 15,552,302. It is very likely CDW will buy back another 7-8million shares to top up the treasury.

I was waiting for the usual insider buys to go with the share buybacks but looking at 2012's buybacks exercise, it seems management will not be doing any buying, unlike what Avi-tech's boss did. 

In 2012, CDW recorded a jump in revenue and profits in their 4Q report right after their massive buy back exercise. In this 3rd quarterly report management has hinted they were in testing phase for volume production of their new product with a new client. They have also cleared out a factory in China for future OEM production. It seems with this buy back exercise, this testing may have been successful and company could be announcing a big deal in next year's 4Q, commencing mass production at the cleared up factory. Of course this is speculation at this point.

In any case, being at net cash value, I have finally decided to start accumulating despite a slightly improving market from oil price recovery, as I feel should 4Q result be bad, downside is limited whilst upside could be substantial if history repeats.

[author has shares in CDW Holdings.]

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.