Memtech International (BOL.SI) - Making some Beats

Memtech International (BOL.SI) - Making some Beats

It's been almost 2 years since I started this blog with a first post on this stock. Much has happened since then. Memtech did well back then, stock price rose from 10c to over 15c(75c+ post consolidation) and then met with some hiccups and made some losses. Memtech has since done a 5:1 consolidation and share price has gone back down to the current 62cents (it did go down to around 55cents when announcing loss making quarter last year). Currently, there seems to be a loss of interest in the stock  from investors.

Memtech is now supplying plastic automotive components to world number 6 automotive parts company Faurecia (which makes car interior components). Faurecia makes interior parts for many major automotive companies, including Tesla. Memtech has been supplying Faurecia for the past year for Tesla model X and S. This year with ramp up of upcoming mass market electric car Tesla Model 3, it looks like there will be a flood of orders coming in for Memtech. Whilst Memtech is only making parts for the climate control system a.k.a aircon (those knobs and stuff you press) there will be avenue for memtech to branch into other parts as Faurecia provides solutions for all the interior parts and Memtech has expertise in Rubber/Plastics.

The other big boost Memtech could get is from its production of parts for major headset brand Beats by Dr. Dre. Apple bought this brand couple years back and Memtech has been making parts for their headphones. However there were some issues with Apple's cost cutting with a contract renegotiation that resulted in the poor results last year. Another popular brand for streaming movies with a TV plug-in stick called Roku has Memtech supplying it as well.

Memtech's most recent 3Q16 results are looking up though with EPS of 2.2 this quarter. Let's have a look at how the valuation stacks up BlueFund Style :

Market cap : SGD 87.346 million
NAV : $1.10
Price : $0.62 (45% discount to NAV)
Debt : 3.04 million (3.48% of MCap)
Net cash : 41.92 million (44.52% of MCap, this includes the $8m coming in from recent factory land sales.)
Dividend yield : 4.84% (based on about 3c past few years. Dividend policy of at least 30% payout)
Daily Volume : What volume? (my favourite type of volume :D)

Usually I try not to dwelve too much into the companies business. The sector the company operates in is more important most times. For memtech, automotive sector in China looks weak this year after sales tax on small cars were reduced last year to spur demand but have been put up again. However consumer electronics sector looks to be stable if not strong so memtech should be able to stay profitable this year.

Management is also trying its best to bring the company into the new-age. The transition of boss to his son should go smoothly as well. In view of this, it looks like an opportune time to start accumulating this now unloved stock. I do hope management looks to cheaper asian countries like Vietnam to move and diversify some of their production.

[author has shares in Memtech International.]

Happy New Year 2017

Happy New Year to everyone and welcome to my humble blog.

2016 brought us the Brexit and Trump :D

2017 looks like it's shaping up to be a very very interesting year. Markets are all bubbly and happy but will this last? Well we'll see, in the mean time, keep vested, enjoy your dividends and polish your elephant guns!

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.]