"Divads" posted the following in our forum. Mfg Integration looks to be a stock with a decent return on low risk, if you have a not-too-short investment horizon.
 Manufacturing Integration Technology is overlooked by investors. It has 2 businesses -- semiconductor equipment business and contract equipment business (CEM). Its outstanding shares total 229M. Summary:
Received cash of around $68M (now with company) and cash of $16M (in escrow account with ICBC singapore) 2) It intends to return ALL the proceeds minus expenses, which works out to be $77M to shareholders via capital reduction/special dividends. 3) After distributing all the proceeds of $77M, the remaining CEM business will have a NTA of 15 cents, including 7 cents net cash. |
|
Dividend |
When (estimated) |
|
24 c |
May/June |
|
3.0-3.5 c |
July/Aug |
|
3.5 c |
Anytime before Aug 2020 |
The $77M is going to be returned to shareholders in 3 payments.
a) 1st payment of 24 cents per share expected to be paid soon. I expect it to be around May/June, once they get the document ready for capital reduction OR it's declared in the Q1/19 financial statement as a special dividend.
b) 2nd payment of $8M (in escrow account) or 3.5 cents per share, if the revenue of the semiconductor business from 1/1/2018 to 31/1/2019 meets $46M target.
|
Stock price |
34.5 c |
|
52-week range |
28 – 37 c |
|
Market cap |
S$80 m |
|
PE (ttm) |
- |
|
Dividend yield |
-- |
|
Year-to-date |
8% |
|
Shares outstanding |
234 m |
|
Source: Bloomberg |
|
The full-year revenue of the semiconductor business (classified as "discontinued operations" in the financial statement) for 2018 was $36M.
The expected revenue for 1/1/2018 to 31/1/2019 should be, or may be slightly less than, $46M.
Assume 1Q = $9M and FY revenue is $45M. So the difference between $46M and $45M is a shortfall of $1M.
The $1M will be returned to the buyer, resulting in shareholders getting $7M as dividend (3 cents per share).
This 3 cents is expected to be paid out after the results for Q1/19 is announced.
I expect this 3 cents to be paid around July/August as Q1/19 results will most likely be annouced in May this year.
c) 3rd payment of $8M or 3.5 cents per share.
If buyer is satisfied and gives the all-clear or the buyer did not initiate claims within 18 mths, then this 3.5 cents will be paid out anytime from now or within 18 mths from completion date (no claims from buyer) which is around August 2020.
| ♦ Paying 2 cents/share for CEM business! | |
The NTA of remaining CEM business after returning all the proceeds from the sale of the semiconductor business will be 15 cents including 7 cents net cash.
Basically, you are paying 2 cents for the CEM business and NTA of 15 cents. Assuming the stock trading price is 12 cents, which is below the NTA of 15 cents, you will have a profit of 10+ cents per share based on an initial purchase price of 33 cents within 18-20 months. And who knows, the company may even decide to return to shareholders the remaining 7 cents net cash too. |
| 22 March update: Company declared an interim dividend of 15.5 cents a share to be paid on 12 April 2019. Company also said it expects to pay out another 8.5 cents per share via a special dividend after effecting a capital reduction. See announcement. |
Comments
Hope author can shed some light. Thanks !
If that happens, MFG will be interesting as they could pay that out without affecting the core biz