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?
