Thursday, November 28, 2013

Nam Lee Pressed Metals - deserve a second chance?

Nam Lee announced it full year results, with dividends of 1.5 cents declared.

It Is still burning cash.

QoQ data is particularly ugly

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Although topline improve, cost balloons and profits is the lowest in 8 quarters.

Cash Conversion cycle worsen.

Inventory and receivables are still high, and the cash burn continues.

looking at Yearly figures

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Capex cycle seem to be returning, expect capex to remain high since they just move to new premises and Sungei Katdut 

Cash per share is only 9.2 cents now, with negligible gearing

Given all the bad data, perhaps we should sell and forget about it, cut loss, instead of nursing higher wounds.

I however, will give it another chance. It will give it another year this time. Here is why:

1) Revenue is at 7 year high, they are still positive about their aluminum business, which is the biggest contributor.

2) Management claim gross profits took a hit due to cost overrun of a particular project which is now substantially completed. The construction boom continues unabated, United Technology is still bullish in outlook, the capturing of higher demand is evident in the increase in top line, if the cost overrun is one-off, and the topline continue to improve, and we wait for capex to settle back to its norm again. We might just be able to ride through this.

3) Dividend falls, payout ratio increases. The company has not been generous but has been fair.Employment option scheme terms reasonable.

4) Still financial steady, the risk is in overpaying, there is no risk of loss or insolvency yet. Looking at the historical valuation, there is no margin of safety but price is hardly excessive. I would not be surpised to see it testing 52 week low soon

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Well, I am not falling in love with the stock, but trying to "make the marriage work",but giving a chance to a company that is not yet hopeless. hahaha self-delusion 

 

 

 

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