Nam Lee Pressed metals

First heard about this stock from dydx in valuebuddies.

Why I see value:

1) Solid business with profit resilence. Positive NP during the GFC years and the 2008 construction upheaval (sand export problem)
2) Strong FCF, while the lastest quarter report shows negative FCF, it has been positive since 2009 and 2008 and 2007 sum of negative cash flow is less than 5 mil
3) Net cash per shares of 21 cents, or almost 2/3 of market price is cash
4) Steady dividend payout consistently, although yield of about 6% is nothing to shout about, it is still decent.
5) P/B 0.72 when av. higest and lowest P/B since 2007 is 1.1 and 0.6 respectively.
6) DUe to its stable business,NAV has been on a steady upwards march since 2007, from 33cents to 48 cents in the latest quarter. I expect the march to continue, enhancing valuation as years go.
7)Steady outlook, carrier (major customer's revenue) and HDB building contracts remain steady and high. The number of units of HDB to be build over the past 6 months already almost equal to the prior 1 year of 16000 units (14000 units, and higher than the average of 13000 since 2007)
Start prefabrication of bathroom business, might be a bonus in revenue generation when the productivity drive in the construction sector come to roast.
9)If we use a conservative reversion to mean method to guage revenue, NP, and Margin, EPS should be around 3.7 cents, enough to sustain dividends.
10) catalyst of cash return through special dividend, which they did in 2007, when the finances wasn't even half as strong.When it hapens, valuation will be rerated upwards, as what happens in 2007 and 2008. Valuation becomes too lofty as it coincide with the bull run.

Negatives:
1) Capex likely to increase from 2014 onwards, when the lease of their factory run up and they move to another.
2) Unlikely to have impressive growth in earnings, just stable, rock solid earnings year after year (NOT a growth stock)
3) Valuation while decently fair, is not actually compelling, take away the bull years of 2007 and 2008,highest and lowest av PB is actually 0.71 and 0.43 respectively.

To accumulate when price fall further, chk attachment for details

Greenrookie: Thank you for sharing. Nam Lee has some attractive features that would make value investors sit up & pay attention. As you pointed out, Net cash per shares of 21 cents, or almost 2/3 of market price is cash. Wow!

As for the "Steady dividend payout consistently, although yield of about 6%", I am a little hesitant about this, as the company classified 1 cent as special dividend. I wonder if this will be reduced or eliminated in 2014 when the big capex for the new factory kicks in.

Hi Vivene,

Even if Capex is to incease there is no way it is going to wipe out 50 million cash. To sustain 2 cents dividends, they need to pay about 5 million, hardly a problem looking at their FCF and cash in hand. In the earlier years capex is 4- 5 million(highest since 2007, i would love to dig earlier data but there is no archive), thus financially, there will be no problem sustaining the dividends. as for the will of management, that is always a risk...

Was reading on shipping news when I come across this:
www.bloomberg.com/news/2013-05-29/maersk...profits-freight.html

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Transport using refrigerated containers is expected to increase to 212 million tons in 2016 from 172 million tons in 2011 because global population is forecast to increase to 7.45 billion by then, according to shipping consultant Drewry.
“This forecast will have a direct effect on worldwide perishable reefer demand, particularly in the high-volume import regions such as Western Europe, North America and Asia,” said Rahul Kapoor, a Singapore based analyst at Drewry. Moving goods in cooled boxes gives companies more margins, he said.

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UTC Climate, Controls & Systems, a unit of Hartford, Connecticut-based United Technologies, has developed a new container-cooling system that uses greenhouse gas to keep fruit and meat from getting spoilt.
That will replace industrially produced hydrofluorocarbons, one of the biggest causes of global warming, John Mandyck, the company’s chief sustainability officer, said in an interview in Singapore May 14. UTC -- the world’s biggest maker of reefers -- expects to start selling the new product called NaturaLine in the second half of this year.

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United Technologies is the parent company of carrier, the major customer of Nam Lee. If demand for reefers are expected to increase, Nam Lee should benefit too, unless Margin is further squeezed in order for Nam Lee to continue with the contract.

Given that the NaturaLine is expect to go on sales in this second half of the year and they have a contract with Carrier until 2014, it means NamLee is already producing the casing for NaturaLine, and hopefully, Carrier will renew their contract with Nam Lee with another 5 years, instead of risking their production with a new supplier

Thus far, the HDB building boom is picking up the slack from carrier due to lower demand from carrier as a result of lower trade, but if the report projected demand pent out, Nam Lee could be firing on both cylinders next year. The risk is always the margin, and weather the higher revenue actually translate to higher profits.

FIO, DYDD

Does anyone doubt that Nam Lee can maintain its final dividend of 2 cents a share? After all, it totals only S$4.9 million.

Trouble is, the 2 cents was designated 1 cent final and 1 cent special for the past 2 FYs. Does that mean the normal dividen to expect is 1 cent? Cld the Special Div be omitted this year as the cash has plunged by half from $52 m to $26 m?

I think it's very likely if q4 continue to be dismal. But, I am keeping my fingers cross, namlee CCC range from 80 over days to hundred over days(most recent q) , so there might be good cash flow in q4 if the high receiveables and inventories in q3 get drawn down and payment get received. Cash flow for the whole year will then be more in line with the yearly av over the last 6 years. But if it is still poor results, then like what drizzit state in his Nextinsight article, last 2 years were exceptional good order period, not its inherent business strength, then I would admits I make a bad call and will exit, regardless of dividends. But now, I will keep my faith for 1 more quarter.