​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

 

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