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.]

Memtech International Ltd

Memtech International Ltd (M26.SI)

Noticed this stock when it was trading at $0.10 levels. Now shot up to $0.123 high after 2Q report.
Balance sheet is rock solid with possible turnaround this year with 2 successful and profitable quarters, after improving their automotive side business in China. Yes China, but luckily this is a Singaporean company and not S-Chip.

More importantly, who owns this company then?
TOP 20 SHAREHOLDERS (Extracted from AR2013)
No. Name of Shareholder No. of Shares %**
1 Keytech Investment Pte Ltd 308,392,000 43.69
2 HSBC (Singapore) Nominees Pte Ltd 42,713,000 6.05
3 Chuang Tze Dey (Zhuang Zidi) 34,037,000 4.82
4 Chuang Wen Fu 27,714,000 3.93
5 Chuang Tze Mon (Zhuang Zimeng) 19,916,000 2.82
6 UOB Kay Hian Pte Ltd 16,805,000 2.38
7 Citibank Nominees Singapore Pte Ltd 13,877,000 1.97
8 OCBC Securities Private Ltd 13,756,700 1.95
9 DBS Nominees Pte Ltd 13,048,000 1.85
10 Wang Jian 10,165,000 1.44
11 Heng Ngee Boon 7,419,000 1.05
12 Ee Hock Leong Lawrence 7,295,000 1.03
13 Gu Chenghua 7,229,000 1.02
14 Chen Zhengmao 7,133,000 1.01
15 Koh Ser Kiong 5,000,000 0.71
16 Xu Jianxin 3,939,000 0.56
17 Quah Wee Hua 3,110,000 0.44
18 Rin Kei Mei 2,652,000 0.38
19 Cai WeiDong 2,650,000 0.38
20 Ong Poh Seng or Tan Swee Chin 2,640,000 0.37
TOTAL 549,490,700 77.87

After some digging, it seems Keytech Investment Pte Ltd is set up in Singapore and owned by 30+ people including the current Board of Directors with a good portion consisting the Chuang family. So management and ownership not too bad, most of BOD also having ~20+ years of experience in their respective fields with half from PRC and half from Singapore.

Memtech was listed on mainboard in July 2004 which makes it a decade old on SGX and has historically been an ok company which has been friendly to minorities in terms of dishing out dividends from earnings. Dividend yield was 6% when share price was stuck at 10cents past few months.

Fundamental snapshot @ $0.123 price :
NAV $0.22
Net cash 45.41%
Div Yield 4.88%
So far management OK, dividends OK, lots of cash OK, discount to NAV OK.
Dun care much for earnings but more concerned about business sector. For Memtech, looks like expansion into automotive segment was a smart move. China will be needing and producing lots of cars in the future even though short term wise, automotive sector there might be sluggish. So business sector outlook OK.
With five OK’s, let’s see how high or low this one runs :D

[ Update April : Profits taken and left some free shares ]