HG Metal Manufacturing Ltd (BTG:SES)

Recent Share Price: S$0.33

Accounting: Singapore Accounting Standards

Fiscal Year: Dec. 31st

Market Cap: S$42.5 million ($31 million)

HG Metal Manufacturing Ltd. operates as an investment holding company, which engages in manufacturing and trading customized flat steel bars and mild steel lip channels.Unknown

It operates through two segments:

  • The Trading segment involves in supplying steel products and includes the holding of investments in subsidiaries.
  • The Manufacturing segment includes producing steel products and provides related engineering services.

With more than 800,000 square feet of land area, HG Metal is one of the largest steel warehouse and processing facilities in Singapore, storing more than 3,000 varieties of steel products for a wide range of industries and applications.

Metal Manufacturing was founded by Tan Chan Too, Tian Chye Heng, Tan Ah Bee, Kuah Kian Leng, and Tan Teng Hian in 1971 and is headquartered in Singapore.

Sales per Businesses
2016 2017 Delta
SGD (in Million) % SGD (in Million) %
Trading 91.86 84.6% 118.22 72.7% +28.7%
Manufacturing 16.67 15.4% 44.39 27.3% +166.34%
Sales per Regions
2016 2017 Delta
SGD (in Million) % SGD (in Million) %
Myanmar 61.10 56.3% 88.48 54.4% +44.8%
Singapore 36.57 33.7% 66.89 41.1% +82.91%
Indonesia 7.20 6.6% 6.39 3.9% -11.34%
Malaysia 3.50 3.2% 0.846 0.5% -75.84%
Others 0.152 0.1% 0.017 0% -88.82%

Recent History

2018

Announced 51.04% stake in joint-venture with Fortune Peak Investments Pte. Ltd. and YNJ Engineering Co. Ltd., to operate a steel rebar Cut & Bend and Fabrication facility In Myanmar.  It is expected to be operational in the first half of 2019 with 50,000-ton processing capability. [press release] [article] [article]

Our current operation in Myanmar focuses on the sale and distribution of steel products. Since 2015, Myanmar has become an increasingly important market for the Group as the country, with a new government in power, increasingly imported construction steel and related materials to accommodate for its infrastructure boom. During FY2016 and FY2017, Myanmar accounted for more than 50% of the Group’s total sales

2017

Announced capital reduction of (i) a write off of part of the accumulated losses to the extent of S$68,176,921.49 and (ii) a cash distribution at S$0.105 per ordinary share. Following the completion of the Capital Reduction, the issued and paid-up share capital is S$76,493,995.87.

Announced disposal of all 42,145,518 ordinary shares of BRC Asia Limited at the consideration of S$0.925 per share (S$38,984,604) of BRC Asia by Esteel Enterprise Pte. Ltd.

Activist Quartz Capital pushed for recapitalization. [HG Response]

2016

Announced reverse stock split 1:10.

2014

Issued 213,600,000 shares at S$0.069 per share (S$0.69 post-split) in private placement for S$14.68 million

Shareholders
Name Equities %
Sey Liang Foo 28,405,000 21.7%
Regroup Holdings Pte Ltd. 8,608,657 6.59%
Tin Htut Aung 8,010,000 6.13%
Nah Tan 6,500,000 4.98%
Ko Ko Aye 6,500,000 4.98%
HG Metal Manufacturing Ltd. 3,193,630 2.45%
Ling Sing Sia 1,940,733 1.49%
Ah Yen Tan 762,100 0.58%
King Sin Ong 732,000 0.56%
Wai See Tan 655,000 0.50%

Other

  • No options outstanding
  • No pension plan
In Millions 12/31/15 12/31/16 12/31/17 6/30/18
Cash and Short-term Investments  50.51 HK$  30.70 HK$  28.85 HK$  18.97 HK$
(0.85 * Accounts Receivable)  27.16 HK$  29.54 HK$  37.64 HK$  42.25 HK$
(0.60 * Inventory)  3.23 HK$  8.53 HK$  10.55 HK$  18.16 HK$
(0.25 * Other Current)  0.05 HK$  1.84 HK$  4.91 HK$  3.29 HK$
Total Liabilities  23.46 HK$  22.39 HK$  18.63 HK$  27.77 HK$
Preferred Stock  –   HK$  –   HK$  –   HK$  –   HK$
NNWC  57.48 HK$  48.23 HK$  63.32 HK$  54.89 HK$
NCAV  64.57 HK$  64.65 HK$  91.73 HK$  84.31 HK$
NCAV + LT Investments  114.08 HK$  115.50 HK$  91.73 HK$  91.35 HK$
TBV  128.98 HK$  129.36 HK$  104.15 HK$  103.84 HK$
Enterprise Value  12.29 HK$  15.38 HK$  24.17 HK$  24.31 HK$
Retained Earnings  22.71 HK$-  21.82 HK$-  33.79 HK$  33.79 HK$
Dividends Paid  –   HK$  –   HK$  14.02 HK$-  –   HK$
Sale or Purchase of Stock  0.02 HK$-  0.31 HK$-  –   HK$  –   HK$
Shares Outstanding  127,418,566  127,417,735  127,417,735  127,417,735
P / NNWC 86% 82% 79% 74%
P / NCAV 77% 61% 55% 48%
P / NCAV + LT Investments 44% 34% 55% 45%
P / TBV 39% 31% 48% 39%
NCAV Burn Rate -7.2% 0.1% 41.9% -8.1%
Debt / Equity 5.8% 1.8% 0.1% 0.6%
Sloan Accrual Ratio -6.3% 10.1% -21.4%
F-Score 6 6 5
FS-Score 6 6 5
Z-Score  2.3  2.1  3.9
Beneish M-Score  (2.9)
ROIC / Tobin’s Q -14.7% -2.3% -20.8%
EV / EBITDA  N/A  10.14  N/A
EV / Operating Income (5yr)  5.36  (1.19)  NA
EV / Operating Income (10yr)  (0.89)
EV / FCF (3yr)  0.46  0.27  NA
EV / FCF (5yr)  (0.60)  4.53  6.02
EV / FCF (10yr)  0.26
EBITDA (FY)  (6.16) $  1.52  $  (9.78) $
Operating Income (5yr)  2.29  $  (12.98) $  (30.42) $
Operating Income (10yr)  (27.24) $
FCF (3yr)  26.89  $  56.30  $  (21.92) $
FCF (5yr)  (20.44) $  3.40  $  4.02  $
FCF (10yr)  92.12  $

Untitled

Blog Posts

  • Off-Piste Investing [here]

Disclosure: We own shares in HG Metal Manufacturing Ltd (BTG:SES).

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