Wednesday, January 15, 2014

My thoughts after reading Nam Lee Metals AR

After reading up on the AR, I find a few interesting points:

Information about major customers (p88):
"In the current financial year, revenue from two major customers amounted to $77 million (2012: $89 million) arising from sales by the aluminium segment and $25 million (2012: $11 million) arising from sales by the aluminium and mild steel segment respectively"

Its quite obvious 77 million come from carrier (pure aluminium business), and 25 million come from HDB (Both aluminium and mildsteel).
Orders from HDB increase, which is what they have been saying, but orders from carrier is falling, or they are being futher squeezed.

Under corporate governance p18:
"Dependence on relationship with a major customer
A major customer accounts for a substantial portion of our revenue. We are therefore dependent, to certain extent, on this major customer, as any cancellation of its sales and purchases would have an impact on
our operations. Although we have long-term contract with our major customer, it may alter its present arrangements with us to our disadvantage, which would in turn have an impact on our operating income, business and financial position and consequently, our operating profits may, to a material extent, be adversely affected. "

Hmm... Benefits of long term contract is rather limited, given the terms can be negotiated to Nam Lee disadvantage.

Now lets look at 3rd quarter performance of UT, especially their climate control segment,of which carrier is a part:




9 months sale fall but yet profits increase, it means COS is lower compared to 2012. Although UTC climate, control and security consist of more than just carrier group, but since there is no further break down, this is the best we can do. A lower cost of sales, would mean lower business for Nam Lee.


(source: )

Orders have been increasing since 4Q12, but sales is falling, I find this puzzling. But Q3 saw a spike in order which translate to stronger sales in Q3, will the numbers flow to Nam Lee?

I expect business and profit numbers to improve over the next few quarters. The high inventory of finished goods, and receivables should collect cash, and given the cost overrun for one particular project is significant complete.

However,I expect the cash burn to continue in Q1, and affect 2014 FY FCF. Because "On 31 October 2013, the Group completed the purchase of a leasehold property located at 21 Sungei Kadut Street 4 at a purchase consideration of $6.35 million. The leasehold property is intended to be used primarily as a factory and office and will be held as property, plant and equipment.," not considering whatever spending on equipment, the 6 million price tax is already the highest PPE in last 10 years.

My thoughts:

Nam Lee is a net cash company with decent earnings, and with trailing PE <9, it is not overvalued either.

But the attractiveness of this investment is starting to fall. Mainly due to the following concerns:

1) No update of renewal of contract with carrier, not to mention weak bargaining position with carrier.

2) HDB tapering its supply

3) Unlikely of higher special dividend in 2014, as I expect capex to remain high in 2014 due to the moving of factory premises.

I will continue to ponder if the opportunity cost of holding NL is too high, as I wait to collect its dividends. In the meantime, I will continue monitor United Technology Q4 and Nam Lee Q1 results. I would most probably reach a decision by then.



  1. Hello Everybody,
    My name is Mrs Sharon Sim. I live in Singapore and i am a happy woman today? and i told my self that any lender that rescue my family from our poor situation, i will refer any person that is looking for loan to him, he gave me happiness to me and my family, i was in need of a loan of S$250,000.00 to start my life all over as i am a single mother with 3 kids I met this honest and GOD fearing man loan lender that help me with a loan of S$250,000.00 SG. Dollar, he is a GOD fearing man, if you are in need of loan and you will pay back the loan please contact him tell him that is Mrs Sharon, that refer you to him. contact Dr Purva Pius,via email:( Thank you.


    1. Name Of Applicant in Full:……..
    2. Telephone Numbers:……….
    3. Address and Location:…….
    4. Amount in request………..
    5. Repayment Period:………..
    6. Purpose Of Loan………….
    7. country…………………
    8. phone…………………..
    9. occupation………………
    11.Monthly Income…………..

    Email Kindly Contact:

  2. 100% safe with us We Offer all types of Finance loans for immediate respond application
    We provide personal loans Business Loans for debt consolidation, bad credit loans, unsecured loans, loans for bad credit and instant secured loans with cheap rates Do you have a firm or company that need loan to start up a business or need, personal loan, Debt consolidation? We will
    provide you with loan to meet your needs.
    Note: We offer the following loans to individuals-
    *Commercial Loans.
    *Personal Loans.
    *Business Loans.
    *Investments Loans.
    *Development Loans.
    *Acquisition Loans .
    *Construction loans.
    *Business Loans And many More:
    and many more at 2% interest rate. For more information contact us. Email: email:
    whatspp Number +918929490461
    Mr Abdullah Ibrahim

  3. Do you need to increase your credit score?
    Do you intend to upgrade your school grade?
    Do you want to hack your cheating spouse Email, whatsapp, Facebook, instagram or any social network?
    Do you need any information concerning any database.
    Do you need to retrieve deleted files?
    Do you need to clear your criminal records or DMV?
    Do you want to remove any site or link from any blog?
    you should contact this hacker, he is reliable and good at the hack jobs..
    contact : cybergoldenhacker at gmail dot com