Dickson Concepts Ltd (113:HKG)

Dickson Concepts (International) Ltd. is a Bermuda incorporated, Hong Kong-based listed company.  The company is chaired and controlled by Dickson Poon.

Brief History

Dicksons Watches Jewellery_2

In 1987, acquired ST Dupont.

In 1991, acquired Harvey Nichols from the Burton Group.

In 2005, acquired Bertolucci SA, manufacturer and distributor of luxury Swiss watches

In 2006, acquired Tommy Hilfiger Asia-Pacific Limited (“THAP”) for HK$396 million.  At the time, THAP operated 89 Tommy Hilfiger retail stores in Hong Kong, Taiwan, the PRC, Singapore, and Malaysia.

In 2009, the company announced the end of its 20-plus year distributorship for Polo Ralph Lauren products in Asia would end [estimated to contribute 10% of its revenues].

From at least 2013, the company has been issuing scrip dividends in lieu of cash payment, based on the election of the stockholder.  In times of good, this is a small issue; however, when the stock trades at a severe discount to assets, the company is overpaying its stockholders with an undervalued security.  Although this is a frustration, it’s a minor one.  If I owned the stock, I’d be taking the scrip — at least.  And it appears Dickson Poon is doing the same.

The most recent scrip dividend [valued at HK$2.94 per share], of this year, increased shares outstanding nearly 13 million shares or over 3%.

On the bright side, the company has bought back over 9 million shares in the recent past, at an average cost of HK$3.22 before expenses.  As of November 2017,  the current shares outstanding stood at 393,251,331.

During the year ended 31st March, 2016, the Company repurchased a total of 9,433,328 ordinary shares on the Stock Exchange at an aggregate purchase price (excluding expenses) of HK$30,370,744. [2017 Annual Report]

It’s a bit difficult to get a handle on, but the company has been closing stores for quite some time. In some periods, they have reported an increase in stores, but the general direction has been downward. In 2008, they reported operating 452 stores [64 in Hong Kong, 237 in China, 3 in Macau, 109 in Taiwan and 39 in Singapore, Malaysia and the Philippines]. In their recent interim report, they are down to 112 stores [25 stores in Hong Kong, 15 in China, 58 in Taiwan, 5 in Singapore, 5 in Malaysia and 3 in Macau].

On the flip side, sales per store have gone up considerably, as total revenue has gone from HK$3.8B in 2008 down to HK$3.1B in 2017.  Without doing the legwork, the most likely explanation is that the company has been closing small stores, kiosks, and pop-ups and opening larger stores.

Other

  • No options have been granted
  • Pension is a defined contribution plan
  • As of March 2017, future minimum lease payments under non-cancellable operating leases payable amount to HK$821,440,000.

    3/31/15 3/31/16 3/31/17 9/30/17
    Cash and Short-term Investments 1,387,000,000 $ 1,456,837,000 $ 1,498,971,000 $ 1,552,526,000 $
    (0.75 * Accounts Receivable) 94,737,750   $ 69,092,250   $ 57,627,000   $ 234,689,250 $
    (0.5 * Inventory) 422,314,500   $ 326,031,500   $ 322,593,000   $ 309,814,000 $
    Total Liabilities 830,313,000   $ 835,097,000   $ 704,778,000   $ 755,733,000 $
    NNWC 1,073,739,250 $ 1,016,863,750 $ 1,174,413,000 $ 1,341,296,250 $
    NCAV 1,760,687,000 $ 1,586,903,000 $ 1,729,222,000 $ 1,729,267,000 $
    NCAV + LT Investments 2,081,716,000 $ 1,855,524,000 $ 1,929,400,000 $ 1,930,507,000 $
    TBV 2,312,536,000 $ 2,018,000,000 $ 2,072,000,000 $ 2,060,000,000 $
    Enterprise Value 338,629,334   $ 441,296,833   $
    Retained Earnings 1,328,890,000 $ 1,368,019,000 $ 1,311,392,000 $
    Dividend Payout (34,638,000) $ (23,193,000) $ (41,850,000) $ (27,046,000) $
    Shares Outstanding 390,930,073 380,451,745 380,451,745 393,251,331
    P / NNWC 121% 86% 90% 84%
    P / NCAV 74% 55% 61% 65%
    P / NCAV + LT Investments 62% 47% 55% 59%
    P / TBV 56% 43% 51% 55%
    NCAV Burn Rate -5.8% -9.9% 9.0% 0.0%
    Debt / Equity 2.9% 3.7% 2.1%
    F-Score 4 5 8
    FS-Score 4 6 7
    Z-Score 2.6
    Beneish M-Score (4.1)
    EV / Operating Income (5yr) 203%
    EV / Operating Income (10yr) 23%
    Operating Income (10yr) 1,483,731,000 $

The company traded above NCAV as recently as 2013.

113

Dickson Poon has been aggressively accumulating shares.  Brandes, (a value shop), looks to have been in this for some time.

SUBSTANTIAL SHAREHOLDERS
Direct Interest Deemed Interest
Dickson Poon 16,246 53.2% 209,331,145
Brandes Investment Partners, LP 30,473,125 7.8%
61.0%

Write-ups:

  • barginhunter blog here

Disclosure:  Placed a limit order @ HK$2.90

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TLV Holdings Ltd (42L:SES)

sub-aboutus-img012017TLV Holdings Limited was incorporated on June 22, 2015, and is domiciled in Singapore at 3 Kaki Bukit Place, Eunos Techpark, Singapore 416181.

TLV designs, manufactures, and sells jewelry via (a) 14 ‘mid-market’ stores (Taka) and 2 pawn stores (Top Cash) in Singapore and (b) an international wholesale business.

TLV Holdings Limited and its subsidiaries were formed through a restructuring exercise, where it became the holding company of Taka Jewellery Pte. Ltd. (“TJPL”) through a share swap arrangement on 17 August 2015. The Group represents the continuation of Taka Jewellery Pte. Ltd. and its subsidiaries.  Annual Report 2017

On August 17, 2015 (FY2016), pursuant to the share swap agreement, the Company issued and allotted 492,455,998 ordinary shares to the shareholders of TJPL for an aggregate consideration of $82,075,999.67 (S$0.17 share) for the entire issued and paid-up capital of TJPL. On September 15, 2015, the company completed a private placement for an additional 76,459,000 shares, (70,777,000 new shares and 5,682,000 vendor shares), at S$0.22 share.

Due to various reasons, the 2016 annual report shows only 73,050,000 shares were issued at $0.22, S$0.20 net of expenses (S$14,643,000), for a total listing of 565,506,000 shares.

In June 2015, the company hired Jim Rogers as a strategic consultant — to expand the business through acquisitions, joint ventures or strategic alliances with parties who create synergistic values (“Strategic Growth Strategy”).

In June of this year, TLV initiated a joint-venture agreement with Maoming Liutao Zhubao Chuangyi Chanye Co., Ltd. to open a chain of retail stores in the Maoming area of Guandong province.  TLV has 34.3% position in the joint-venture. [TLV has a 70% stake in Taka HK Venture; Taka HK Venture has a 49% stake in the JV.]

The total amount of the Taka HK Venture’s investment in the Proposed PRC JV shall be RMB 9.8 million (equivalent to approximately S$1.97 million) and be funded through internal resources.  [Press Release]

Total share-count on March 31, 2016 of 565,506,000 was reduced 6,100,000 to a March 31, 2017 balance of 559,406,000 — via a S$698,000 treasury repurchase. [No outstanding options issued.]  Insiders own the majority of the shares outstanding.

SUBSTANTIAL SHAREHOLDERS
Direct Interest Deemed Interest
Teo Boon Leng* 171,359,453 30.6%
Ang Kah Leong* 157,884,355 28.2%
Lee Sui Hee 55,733,478 10.0%
Sim Choon Lam 29,033,684 5.2%
74.0%
 *Co-founders (1997)

The balance sheet is strong and cheap, with the stock trading at 60% of NCAV.  Metrics are solid, but FS-Score is low due to current free cash flow issues.

3/31/16 3/31/17
Cash and Short-term Investments 12,709,000   $ 10,340,000   $
(0.75 * Accounts Receivable) 34,689,000   $ 36,288,000   $
(0.5 * Inventory) 48,351,500   $ 41,674,500   $
Total Liabilities 67,425,000   $ 53,990,000   $
NNWC 28,324,500   $ 34,312,500   $
NCAV 88,388,000   $ 88,204,000   $
NCAV + LT Investments 93,638,000   $ 93,767,000   $
TBV 100,938,000   $ 100,637,000   $
Enterprise Value 96,793,570   $
Retained Earnings 69,362,000   $ 69,354,000   $
Dividend Payout (5,004,000) $ (2,171,000) $
Shares Outstanding 565,506,000 559,406,000
P / NNWC 200% 155%
P / NCAV 64% 60%
P / NCAV + LT Investments 60% 57%
P / TBV 56% 53%
NCAV Burn Rate 28.0%* -0.2%
Debt / Equity 11.7% 12.1%
F-Score 4 5
FS-Score 5 4
Z-Score 2.7
Beneish M-Score (4.0)
EV / Operating Income (5yr) 237%
EV / Operating Income (10yr) 237%
Operating Income (10yr) 40,904,000   $
*Due to IPO/Restructuring

Notes:

  • Future operating lease commitments in 2016 stand at S$11,763,000.
  • Defined contribution pension plan
  • Allowance for impairment of receivables went up to S$2,095,000 (2017) from S$864,000 (2016)
  • The Company issued 73,050,000 new ordinary shares pursuant to the initial public offering of the Company at $0.22 per share of which 1,591,000 shares amounted to $350,000 was issued to PrimePartners Corporate Finance Pte. Ltd. (“PPCF”) and 682,000 shares amounted to $150,000 was issued to Group Financial Controller (“GFC”).
  • The company has closed a few stores in past 2 years.

Disclosure: Placed limit order @ S$0.094

​Sin Ghee Huat Corp Ltd (B7K:SES)​

SGH-logo-newSin Ghee Huat Corporation Ltd is engaged in the sale and distribution of stainless steel products, including; bars, plates, pipes, flanges, tubes, and fittings. The company’s segments include:

  • Marine and ship-building;
  • Oil, gas, and petrochemical;
  • Building and construction;
  • Machining and processing, and
  • Trading and others.  

The company distributes 304/304L and 316/316L grades of austenitic stainless steel, as well as duplex steel products and specialty metals. 

The main warehousing facilities are located at 62 Tuas Basin Link and 32 Gul Crescent in Singapore. They also have a warehousing facility in Suzhou Industrial Park, China.

According to their most recent annual report and most recent (unaudited) quarterly results, things are not looking good for the company.  The prolonged difficulties in shipping and oil & gas have taken its toll on the financial results.  Although the company is doing what it can to control costs and reduce inventories, the revenue growth shows no hope on the horizon.  Fears of a China asset bubble, depressed shipbuilding, and general malaise of fossil fuels are weighing heavily on the near-term outlook.

The company trades at 62% of net current asset value, with solid statistical numbers per Piotroski, Altman, and Beneish.

6/30/15 6/30/16 6/30/17
Cash and Short-term Investments 16,870,000   $ 26,003,000   $ 30,737,000   $
(0.75 * Accounts Receivable) 12,034,500   $ 8,493,750   $ 7,686,000   $
(0.5 * Inventory) 22,374,500   $ 19,388,000   $ 18,432,500   $
Total Liabilities 5,066,000   $ 2,644,000   $ 3,218,000   $
NNWC 46,213,000   $ 51,240,750   $ 53,637,500   $
NCAV 75,036,000   $ 73,460,000   $ 74,632,000   $
NCAV + LT Investments 80,199,000   $ 77,632,000   $ 76,670,000   $
TBV 89,111,000   $ 85,860,000   $ 84,472,000   $
Enterprise Value 20,101,000   $
Retained Earnings 37,110,000   $ 35,726,000   $
Dividend Payout (3,330,000) $ (3,330,000) $ (1,110,000) $
Shares Outstanding 222,000,000 222,000,000 222,000,000
P / NNWC 125% 87% 87%
P / NCAV 77% 60% 62%
P / NCAV + LT Investments 72% 57% 61%
P / TBV 65% 52% 55%
NCAV Burn Rate 0.8% -2.1% 1.6%
Debt / Equity 5.7% 3.1% 3.8%
F-Score 5 6 5
FS-Score 6 7 5
Z-Score 10.6
Beneish M-Score (4.4)
EV / Operating Income (5yr) 168%
EV / Operating Income (10yr) 41%
Operating Income (10yr) 48,550,000   $
Insider ownership levels point positive.  Kua Eng Watt (wife) and Kua Eng Bee (husband) each have a 1/3 interest in 2GS Investment Pte. Ltd.; the company has interests in the remaining 1/3 — from what I can gather.  Kua Eng Bee, 65, is the senior manager for sales and marketing.  Kua Peng Chuan, 34, is a board director and market development director.
SUBSTANTIAL SHAREHOLDERS AS AT 6 SEPTEMBER 2017
Direct Inerest Deemed Interest
2GS Investment Pte. Ltd. 56,700,000 25.5%
Kua Geok Lay Holding Pte. Ltd. 52,635,000 23.7%
Kua Chee Hong 13,599,000 6.1% 2,609,100
Ler Bee Chin 2,609,100 1.2% 13,599,000
Kua Eng Watt 560,000 0.3% 56,700,000
Kua Eng Bee 0 56,700,000
Kua Peng Chuan 11,102,000 5.0%
61.8%

Asset values have been propped up reasonably well for the past 10 years — as NCAV burn rates have been mitigated.  Market values have traded at par with NCAV, but it’s been a while.

Untitled
This is a solid net-net for a diversified basket.
Disclosure: Placed limit order @ S$0.20