Tuesday, April 22, 2008
Results Brief
Tomson (258)
There was some progress in the selling of a smaller luxury housing project in Pudong. Proceeds were $1 billion or thereabout and delivery should happen in 2008. This should bring in some decent profit but overall valuation of Tomson still hinges on Tomson Riviera, which takes up at least 2/3 of the company valuation, with the remaining 1/3 composing of smaller developments, commercial buildings, and a golf club.
2 out of the 4 towers of TR have been labeled rental properties and that mark-to-market adjustment increased the company NAV to $7b, more than double of the market capitalization of $3.3b. The remaining 2 towers should push the NAV to over $9b.
The biggest risks remain to be the timing of sale, the application of the Land Appreciation Tax, and how the proceeds are to be used.
Treat it like holding the property itself should make one comfortable. I would rather invest in completed properties with discount to market price than in a landbank with massive premium to NAV, or 'adjusted' NAV which one can never be sure how those adjustments came about.
RIMH (1997)
Results were slightly ahead of my expectation, earning $312m with a net margin of 9.3%. Turnover and net profit was up 57% and 70% respectively. ROE was 25% and there was no debt. Whether this momentum can be sustained is to be seen, as this account was the 1st one post listing.
I hope any impact from the resignation of independent directors and accounting staff will be left behind after say the next interim report. But looking at the pay scale of RIMH I do think the last debacle might have to do with compensation.
On fundamentals, RIMH seems vulnerable as it's single product/process company. SMT processing is also a single step in the LCD display manufacturing process. Its good fortune relies to a large extent on its relationship with fellow Taiwanese LCD manufacturers. But at least RIMH is slightly better positioned than pure LCD display assemblers. The growth of flat TV market worldwide should continue.
However, I wouldn't count on RIMH getting a very high p/e ratio, perhaps a max of 8x is already very generous at today's market. Deducting from this, the current p/e of 4.6x puts RIMH as a speculation but not a very compelling one.
RIMH will be reporting its quarter results on the 28th and there was speculation of a special dividend. But I certainly won't want one if the reason is a slowdown in business.
Meadville (3313)
Results were expectedly good. Turnover went up by 43% to $4.5b and net profit (after adjusting for share award expense) went up by 61% to $700m. Net margin was 15%, also up slightly and ROE was 25%. Capital account i.e. fixed assets doubled up last year while net gearing increased to 80%.
The 1st report after listing is usually good for most companies so let's not get too carried away. But I do like Meadville focuses its PCB business on telecom infrastructure which makes it a beneficiary of the huge capax program of the telecom companies. These higher count PCBs and HDIs required also make Meadville more resilient to margin erosion. I also like it generates 2/3 of turnover within China making it less vulnerable than other export based manufacturers.
Another bright point is the acquisition of Aspocomp's shares and plants in China last year. The giving up of manufacturing capability by a Norwegian company in the business is good proof that higher-tech manufacturing outsourcing is continuing and that Meadville has reached a certain plateau to satisfy even the toughest customer.
Talking so much about tech, it's also good to know PCB manufacturing is a lot less technologically evolving than other sectors like for example LCD modules, where manufacturers seem always one generation behind the latest products on market.
Business is expanding fast but if the consumer electronics sector slows down then Meadville will be affected nonetheless. But the higher technological content of its products should provide ample cushion (for there's fewer competitors on that level). The telecom side of the business looks promising as well.
At p/e of about 5x Meadville is a more solid bet than RIMH.
DISCLOSURE: I hold 258, 1997, and 3313 at time of writing.
There was some progress in the selling of a smaller luxury housing project in Pudong. Proceeds were $1 billion or thereabout and delivery should happen in 2008. This should bring in some decent profit but overall valuation of Tomson still hinges on Tomson Riviera, which takes up at least 2/3 of the company valuation, with the remaining 1/3 composing of smaller developments, commercial buildings, and a golf club.
2 out of the 4 towers of TR have been labeled rental properties and that mark-to-market adjustment increased the company NAV to $7b, more than double of the market capitalization of $3.3b. The remaining 2 towers should push the NAV to over $9b.
The biggest risks remain to be the timing of sale, the application of the Land Appreciation Tax, and how the proceeds are to be used.
Treat it like holding the property itself should make one comfortable. I would rather invest in completed properties with discount to market price than in a landbank with massive premium to NAV, or 'adjusted' NAV which one can never be sure how those adjustments came about.
RIMH (1997)
Results were slightly ahead of my expectation, earning $312m with a net margin of 9.3%. Turnover and net profit was up 57% and 70% respectively. ROE was 25% and there was no debt. Whether this momentum can be sustained is to be seen, as this account was the 1st one post listing.
I hope any impact from the resignation of independent directors and accounting staff will be left behind after say the next interim report. But looking at the pay scale of RIMH I do think the last debacle might have to do with compensation.
On fundamentals, RIMH seems vulnerable as it's single product/process company. SMT processing is also a single step in the LCD display manufacturing process. Its good fortune relies to a large extent on its relationship with fellow Taiwanese LCD manufacturers. But at least RIMH is slightly better positioned than pure LCD display assemblers. The growth of flat TV market worldwide should continue.
However, I wouldn't count on RIMH getting a very high p/e ratio, perhaps a max of 8x is already very generous at today's market. Deducting from this, the current p/e of 4.6x puts RIMH as a speculation but not a very compelling one.
RIMH will be reporting its quarter results on the 28th and there was speculation of a special dividend. But I certainly won't want one if the reason is a slowdown in business.
Meadville (3313)
Results were expectedly good. Turnover went up by 43% to $4.5b and net profit (after adjusting for share award expense) went up by 61% to $700m. Net margin was 15%, also up slightly and ROE was 25%. Capital account i.e. fixed assets doubled up last year while net gearing increased to 80%.
The 1st report after listing is usually good for most companies so let's not get too carried away. But I do like Meadville focuses its PCB business on telecom infrastructure which makes it a beneficiary of the huge capax program of the telecom companies. These higher count PCBs and HDIs required also make Meadville more resilient to margin erosion. I also like it generates 2/3 of turnover within China making it less vulnerable than other export based manufacturers.
Another bright point is the acquisition of Aspocomp's shares and plants in China last year. The giving up of manufacturing capability by a Norwegian company in the business is good proof that higher-tech manufacturing outsourcing is continuing and that Meadville has reached a certain plateau to satisfy even the toughest customer.
Talking so much about tech, it's also good to know PCB manufacturing is a lot less technologically evolving than other sectors like for example LCD modules, where manufacturers seem always one generation behind the latest products on market.
Business is expanding fast but if the consumer electronics sector slows down then Meadville will be affected nonetheless. But the higher technological content of its products should provide ample cushion (for there's fewer competitors on that level). The telecom side of the business looks promising as well.
At p/e of about 5x Meadville is a more solid bet than RIMH.
DISCLOSURE: I hold 258, 1997, and 3313 at time of writing.
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