Powermatic crowd7.17Good turnout -- investors were keen to learn about Powermatic's business.  The Q&A session lasted more than an hour.  Photo by Goh Han Peng
Powermatic board7.17L-R: Independent directors Tom Yee and Prof Lye Kin Mun | executive chairman Dr Chen Mun | executive director Katherine Ang | finance manager Molly Chua. Photo by Winston Ho.

agm logoTime & date: 11 am, 25 July 2017.
Venue: Wilkie Edge.



drchenmun7.16Dr Chen Mun, executive chairman and CEO of Powermatic Data Systems. NextInsight file photoPowermatic Data Systems reported a net profit of $4.2 million, up 47.2% y-o-y, drawing praises from several shareholders who spoke up at the AGM.

The secret sauce, we learnt, is the wi-fi connectivity solutions that Powermatic has in recent years supplied to enable wi-fi connectivity in transportation vehicles, such as trains, buses and taxis, especially in Europe and the US.

Powermatic Data FY2017

Gross profit margin

44.6%

Net profit margin

27.0%

Dividend yield*

5.26%

Dividend payout ratio*

58.5%

Price/NAV

0.7

* Based on $1.33 stock price and 5-c ordinary dividend and 2-c special dividend for FY2017.

It's a field with relatively little competition because it's a low-volume, high-mix business.

"We are in a niche area -- but it is getting bigger and bigger," said Dr Chen Mun, the executive chairman.

It has higher barriers to entry as lots of intellectual property and value-add are required, he added.

This helps explain Powermatic's high gross profit margin of 44.6% and net margin of 27% in FY2017 ended March.

The results reflect Powermatic's transition away from its low-margin distribution business as well as away from selling access points for the mass market, said executive director Katherine Ang.

Powermatic Mano7.17Powermatic shareholder Mano Sabnani.
Photo by Winston Ho
Powermatic supplies radio modules which are then integrated with the hardware and software of its customers, who then on-sell the final product to corporate users such as train operators.

Powermatic said it has released more than 10 cutting-edge products, including the "world's first standard miniPCIe form factor 4x4 WAVE 2 radio".  (Yeah, this is too technical for most of us to comprehend)



Powermatic question7.17Photo by Winston Ho "We have one of the best radios in the world."

Powermatic is an authorised design centre for Qualcomm Atheros which supplies radio chipsets. Powermatic was the first Qualcomm design centre in Asia when it was set up three years ago.

Aside from its growing business, Powermatic is looking attractive as it has been consistently paying 5 cents a share (adjusted for a share consolidation excercise in Aug 2015) in dividends a year.

A special dividend of 2 cents a share will be given for FY2017. In absolute dollars, the aggregate 7-c dividend will come up to $2.45 milion.

It's well within Powermatic's means, given its large cash reserves and a valuable investment property (see below). 

 

What Powermatic does
Powermatic produces customised solutions for clients using Qualcomm's wireless chipsets. 

Powermatic's solutions, including hardware manufactured in its Suzhou Industrial Park plant, are sold to its customers who market them to end-customers which are large corporations, such as telcos, in diverse industries. 

Stock price  $1.33
52-week range 95.5 c - $1.35
PE (ttm) 11.1
Market cap S$46.6 million
Year-to-date return 30.4%
Source: Bloomberg

Market cap $47 m vs assets $68.2 m
1) Investment building value $33.5 m
2) Cash $25.9m
3) Financial assets $8.8 m
Total $68.2 m

Powermatic had net cash (and zero borrowings) amounting to S$25.9 million as at end March 2017, up from S$21.1 million a year earlier. 

Its freehold investment property in Harrison Road is valued at $33.5 million by Knight Frank.

The cash and the property value combined already exceed Powermatic's market cap of about $47 million.

To several shareholders' suggestion that the company divest its property, Dr Mun said the company had received offers and is open to selling if a good offer comes along. But the company is not actively marketing it.

Its business (
manufacturing and sale of wi-fi connectivity solutions) requires relatively little capex (FY2017: $387,000). 

Aside from the S$25.9 million cash, Powermatic holds about S$8.8 million under "other financial assets". 

The chief investment, accounting for $7.3 million in current value, are two undisclosed Thai-listed stocks which were bought some 30 years ago at "ground-floor prices".

They are a security printing company and a computer distributor.

Powermatic is not an active investor: Its other significant holding is $1 million worth of bonds.

 


Share Prices

Counter NameLastChange
AEM Holdings0.8000.045
Alliance Mineral0.310-0.005
AusGroup0.0410.002
Avi-Tech Electronics0.380-
Best World Int.1.2200.010
China Sunsine1.180-0.030
DISA Limited0.008-
Dutech Holdings0.2500.030
Federal Int. (2000)0.2700.010
Food Empire0.550-0.005
Geo Energy0.225-0.010
Golden Energy0.315-0.010
GSS Energy0.130-0.003
Heeton Holdings0.5250.005
ISOTeam0.330-
KSH Holdings0.595-0.015
Lian Beng Group0.500-0.005
Miyoshi0.052-0.001
Nordic Group0.495-
Oxley Holdings0.3400.005
REX International0.041-
Riverstone1.100-0.010
Roxy-Pacific0.430-
Serial System0.146-
Sing Holdings0.410-
Sino Grandness0.200-0.005
Straco Corp.0.7300.015
Sunningdale Tech1.410-
Sunpower Group0.595-
The Trendlines0.102-
Tiong Seng0.330-0.010
Trek 2000 Int.0.114-
Uni-Asia Group1.350-0.010
XMH Holdings0.2800.010
Yangzijiang Shipbldg1.0800.040

NextInsight RSS

rss_2 NextInsight - Latest News

Online Now

We have 1327 guests and no members online