Excerpts from analyst's report

jackylee_chinaNRA Capital analyst:
Jacky Lee (left)

Maintain forecast and Overweight. We maintain our FY15-16 net profit forecasts. Nevertheless, our fair value has increased by 6 cents to S$0.25 after we roll forward our 8x FY14 PER to FY15 and partially due to the appreciation of USD against SGD.

We believe the credit risk is almost zero as the group has purchased credit insurance covering majority of its customers in the electronic components distribution business since 2013 (none of its creditors have accounted more than 5% of its total receivable).

Maintain Overweight with 74% potential upside and generous dividend of 7-9% projected.

Derek2.15Derek Goh, chairman of Serial, presenting at the recent FY214 results briefing. NextInsight file photo.
Leveraging its extensive management experience on electronics trading activity.

The group can now better focus on the integration of the supply chain and operations after completing its acquisition of the entire distribution and trading entity arm of GSH Corporation and a 49%-equity stake of Achieva as it extends its regional distribution business beyond components such as chip sets to finished consumer products.

We believe these acquisitions will improve its revenue and economies of scale.

4Q14 sales increased by 23% yoy to US$268m, led by North Asia market with strong demand in the smartphone, consumer electronics, household appliances and automotive sectors. Gross margins improved by 0.1% pt yoy to 9% in 4Q14 due to increase in sales of higher margin products in Hong Kong and South Korea

Balance sheet remains healthy. Excluding purchase of investments, the group generated a positive free cash flow of US$12m in 4Q14 after improving its working capital requirement.

The board declared a higher 0.75 cts final dividend, compare to 0.31 cts from last year. This bring total dividend yield for 2014 to 7.3%.

Full report here.

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