Sunday 23 February 2020

Dynamic Colours Limited (SGX: D6U) (Dynamic results with decent value?)

Dynamic Colours Limited(SGX: D6U) posted its results on a Sunday Morning (strangely enough)

Profit came in at 107.3% higher than previous year, with 1 SGD cent dividend declared

Valuation in Numbers based on closing price of 0.179
PE: 9.72
Dividend Yield: 5.5%
Price to Book: 0.8
Cash per share: 13 cents
Cash per share net of liabilities: 6.4 cents

With more than 1/3 of its current market cap being cash, the business is trading at low valuations.

Counting in only continued operations, the net cash PE comes at 7.6.

With core earnings coming in at 1.5 SGD cents, I believe the company has the ability to pay the dividends of 1 cent as well.

Looking at the cash flow statement, it has performed tremendously well.
The depreciation is high and the capex is low, which means cash flow generation has been good. Though there is still a need to keep a look out for future capex.

The key value comes in the announcement that their china plant and land has been compulsory acquired by the government

From the announcement, it has stated that the company will receive $12 million USD and  the estimated gains will be $5.8 million USD or 3.9 SGD cents per share.

From its cash flow statements, it has received $5.1 million which means there is half of the gain to be recognized.

Adding that to the cash it already has, it should mean that at current price at least half of the market cap is cash.

That to me is a really cheap business, though we would have to keep an eye on the Polyethylene Packaging business which had lumpy earnings

A key reason i believe for the lumpiness will be the price of Polyethylene

It has decreased in 2019 and probably has lead to a better bottom-line.

Closing Thoughts

  • It is a company i have been tracking since September last year but there really isn't much selling going on for me to purchase it. 
  • It is a cheap company as of now but as its FY 2018 and 2019 results have shown, it is susceptible to fluctuations
  • Though the recent compulsory acquisition would definitely have added more cash to the company and made it a much safer and value buy. 
  • It is worth noting that the company has given out special dividend before back in 2016 when they disposed their factory in Yishun.
  • Pulling the trigger is not the issue, the issue is would there be one for me to pull?

Sunday 2 February 2020

Stocks on my watchlist are not cheap enough for me yet...

It has been a very bad week for investors who are vested.

To me adding is always an art because you have to balance with what you have in stocks already and your cash levels while thinking if repeated adding would be effective against your portfolio. Of course how fast you replenish your cash levels matters as well.

The urge to add more has always been there this week but its really not cheap enough yet.

HSI as of 1 Feb 2019 was  27930
HSI as of 31 Jan 2020 was 26312.

Going by rationale the 1 year performance would be roughly down about 5%

Will go over the watch list vaguely

China Property Coys (KWG Grp), Cement Coys (Conch Cement, Asia Cement)
- Its not anywhere near its 1 year lows yet.

Macau Concept Stocks (Galaxy Ent, Shun Tak Hold)
-3% down from 1 year price is not really an attractive entry for Galaxy Ent
-Shun Tak being a holding coy of SJM, is not near its 1 year lows as well.

Counters that I already held (1100, 610, 2686, 8502)
-610 not at 1 year low
-2686 is at a 1 year low but having added through out the past 12 months, would probably want a lower price to add more
-8502 only initiated in past 2 months
-1100 being the only counter i would want to add as it has really corrected in the past 12 months. The only reason i have not added is because the 3 months return and the 1 week return difference is roughly 4% which i feel the 'virus' effect has not kicked in on this counter.

NWS Holdings (44% down in 1 year)
-This is quite interesting as the company has found a new low once again. Being a mid/large cap definitely does have its implications of moving with the market trends and industry trends.
-Its possibly one of the companies that you would buy if you bet that the virus and protest are short term problems.
-Roads (Likely traffic affected due to lesser travels and possibly companies stopping work)
-Aviation( Plans to tap into the China Leasing Market a real bane as air travels in China should be at an all time low)
-Duty Free Shops, Convention Centres (Tourism double whammy, Virus + Protest. Possible cancellations of Exhibitions, Concerts and Shows)
-Transport (Some operations affected such as Macau HK connecting buses and Ferries Operations)e
-Construction (Should be fine but order books under threat if prolonged situations result in lesser expansion)
-Insurance (Should be fine as well but have to see the numbers.)
-Logistics (Likely affected due to lesser business activities by companies resulting in lesser demand for ports and storage operations)
-Environment (Should be fine)

The headwinds are plenty for this company. The impacts are most likely going to be reflected in its full results in September instead.
Though the results briefing in Feb for its half year and its reports should give some clue.
Estimating the impact is quite difficult for this company such that one has to just keep averaging if the long term belief is things will be better.

I believe the upcoming week should see some purchasing opportunities. I would be terribly surprised if i don't see any.