AEM Q3' 2021 (Price - SGD4.78) (Calculate IV = 6.21)

 Target:

AEM target - 2020 - 520Mil

Acquire CEI on 2020 - Revenue - 140mil 

AEM target 2021 - Increase from 525mil to 550mil. 

Financial

From the table, we can see that revenue and profit increase every quarter. If AEM want to achieve 550mil, they need to get 212mil revenue in Q4. Looking back at 2020 result, they've set 520mil target revenue and they had achieved 518mil. That mean that management is setting a reasonable and achievable target. 

With the worldwide material shortage, AEM may have buy more to keep stock and causing inventories increase significantly. Cash has increased 51 percents . 

Business outlook

AEM mentioned that Q4 and 2022 demand will increase and they are working with top 20 semiconductor company on technical. 

My thought

I think the 550mil target revenue is abit low, AEM has acquired CEI and their revenue is 140mil. Meaning that AEM only contribute 410mil for this year? Lower than last year about 110 mil. 

Let's do a quick math: 

Price - 4.78

Assume Revenue - 550mil , Earning - 15.5% of 550mil = 85.25mil 

Assume Earning per share - 0.27

SHE- 308,792,506

P/E = 4.78 / 0.27 = 17.7

ROE = 85.25 / 368.792 = 23%

If P/E = 23 , price = SGD 6.21

Xinyi Solar (16 Oct 2021 - HKD 15.90) (17% IV - 14.28 and 8% IV - 9)

 Company Profile

Xinyi Solar is a company produce solar glass panel. There are few plants in China and 1 plant in Malaysia and their melting capacity is 11,800 tonne/day. Beside produce solar glass, they also have their own solar farm business, they are total 42 solar farm and able to generate 3,322 MW. 

Financial performance

 As we can see from the table, revenue is increasing and EPS growth is 6.6% from 2017 to 2020. EPC is one time service, if we take out EPC it will be 17% CAGR from 2017 to 2020. 

Income Statement

Due to high demand of the solar panel, revenue is doubled from the previous quarter. This is due 1H 2020 having lock down and affect the delivery and installation. Profit also doubled compared to 1H2020. 

Balance Sheet

From the balance sheet, we can observed that receivable is tremendous high. Apparently, company is not doing a good job on getting the cash back or it may be is a "financial reporting skill". Company is in a net cash position. Receivable is 20percents of total assets or the whole year of 2020 revenue and this is alarming. 

Cash Flow

Looking at the table above, we can clearly see that will the high CFFO, company is generating positive FCF. Company keep expanding the business, hence it will lower down the cost of production. Company also mentioned that they keep improving the production and process to have high efficient of production. 

My thought

My only concern is the receivable, with the high receivable , company may default the payment and some of the receivable is > 2 years and is alarming! 

Let's calculate the IV. 

Guestimation:

Price = 15.90

EPS = 0.60

P/E = 26.5

Ordinary shares = 8,810,127,000

Shareholder Equity = 33,814,601,000

ROE = 0.6 X 8,810,127,000 / 33,814,601,000 = 15%

Using EPS Discount flow to calculate IV: 

PEG - 1.76

17% growth = IV - HKD14.28 

8% growth = IV - HKD 9.00

CE scoring - 70%

VICOM (26 Sep 2021 - SGD 2.01) - Dividend calculator - (IV = 1.3 , 5 percent)

Business Overview

Vicom is company that doing vehicle inspection. Vicom holds 100 percent stack of Setsco and Setsco is a company doing testing (ie. NDT, water test and etc). Vicom has total 7 locations doing vehicle inspection business and 1 location doing non-vehicle testing business. 

2020 Financial Summary

Year 2019, Vicom has exercise 4 to 1 stock split. 

From the table, we can observed that Revenue is hovering around 100mil. Due to pandemic in 2020, business is impacted and only able to achieve 86mil. Average operating profit is at 34.2mil. Return on equity is around 20!!! What a good company!!!

Income statement (1H2021) 

1st half revenue increase 23 percent due to Singapore is slowly loosen the control. Besides that, Singapore also provide support 1.2mil for the company. PAT increase 23 percent. 

Balance Sheet

From the balance sheet, we observed that company cash reduce 12mil. This is due to dividend given to shareholder about 22mil. Other than that, there is not much changes. 

Cash flow

Company generated positive operating activities about 12mil and capex only 8mil. FCF - 4mil. 

Company dividend policy is 90percent of the profit. But in 2017 and 2018, they declare 120percent of profit for dividend

My thought

Vicom from SGD2.25 dropped to SGD2, drop about 12 percent. 

Let's have a rough calculation on this stock whether it worth to buy it. 

EPS: 3.38 X 2 = 6.76 

P/E : 30

ROE: SGD 24MIL / 125MIL = 19%

This stock not a growth. Hence, we should use dividend approach to calculate the intrinsic value. 

Avg dividend - SGD0.066

My dividend expectation is at least 5 percent for Singapore stock. 

DY = 0.066 / X *100 = 5

IV = SGD1.3 

Current DY - 0.066/2.01 = 3.2%

Even though company provide 120% dividend in year 2017 and 2018, but in one day it will definitely stop paying for 120% as the cash will keep dropping and remain 90percents. For conservative investor, we will plan for the worst and hope for the best. 

Although the company has high margin of profit , no debt and high ROE. But it still not a stock that worth to hold at this moment. 

VALUETRONIC (12 Sep 2021 - 0.59) FY2021

Financial information - FY2021 (Mar 2020 - Mar 2021)

Valuetronic FY2021 report, from the table we can notice that Revenue contributed by CE drop significantly, this is due to was due to a key customer experiencing weak demand and its production switch-over from the Group’s China factory to another vendor in an ASEAN country as scheduled.

For ICE, the surge in demands in logistic industry and e-commerce benefited several key customers

during the pandemic lockdown. The prolonged pandemic also caused a delay in the schedule of a customer in the auto industry in its production switch-over from the Group’s China factory to another vendor in North America, which led to continued orders from that customer during FY2021.

Vietnam Campus

Vietnam campus will commenced by end of FY2022 (Mar 2022). It provides EMS, machining and injection molding services. 

My thoughts

From previous report management team keeps highlighted revenue will drop significantly. Need to wait for next half year report to know the shifted of the company will caused how much drop in revenue. From the other EMS industry, seem like they are in ramping stage but Valuetronic is slowing down. Management unable to keep the current customer causing revenue drop. 

From the report, the group revenue is contributed by 4 main customers and each contributed more than 10 percents of the revenue. This is a big risk due to depends on the main customer, the group should diversify the customer. 

Let's have a brief calculation. 

If revenue drop 20percents for next quarter. 

2021 Revenue drop 20 percents - 2281mil x 0.8 = 1824 mil 

Net profit margin - 7.5%

Net profit = 136.8mil

Ordinary shares = 435,048,782

EPS = HKD 0.31 = SGD0.053

With current price - 0.59 

PE = 0.59 / 0.053 = 11.13

SingMedical 1H21 (SGD 0.315 , 17 Aug 21)

1H21 Singapore Medical Group

This is the stock that I've invested in 2017 and stay in premium condo for 4 years now. Lots of thing happened and I still holding this stock. Let's look at their financial report 

INCOME STATEMENT

1H2020 definitely is not a good year for all companies. During that period, we are in lock down condition, unable to go out buy food and cannot even go company. Circuit breaker, government not allowed to go out. Time flies, with high vaccination rate and achieving herd community, government start to slowly open the border. All people stuck in Singapore and went to Aesthetic to do facial, company slowly gain back the momentum and profit for the period increased to 7.7mil from 3.4 mil. 

Balance Sheet

Intangible assets >30 percents of total assets. This is not a healthy balance sheet and this is the lesson learnt for me. This quarter, we can see that loan and borrowing is reduced, no doubt is a good thing. This company is a net cash company. 

Cash flow

Company able to generate positive cash flow even though at this tough time. Besides that, from the cash flow, we know that management team is working hard to pay off all the debt and also acquire PPE for growth. 

Segmentation

From the report, we can see that health contributed 61percents of the revenue. But Dignostic and Aesthetics is the area that have higher profit margin and the demand is increasing fast. This might be due to border close and causing internal spend. 

Geographical

From the report, we know that Indonesia and Australia are making profit. Whereas for Vietnam, the losses is increasing. Recently (Sep 21), SMG is increase stack on Vietnam. 

My thought

Actually this counter is not bad, just don't know what it never go up. Holding for 4 years and waste my time. Vietnam is growing and definitely healthcare will get benefit. This counter need so catalyst to boost the price up. Overall the financial report is not bad. 

Must take note of next quarter report, if vietnam turn losses into profit then we can consider to buy in. 

Let's calculate the ROE

Total equity: 158,565

Net profit : 7,727

ROE:4.8% 

EPS:1.49 

Rough estimation earning: 1.49 x 2 = 2.98 

Price / Estimate Earning = 10.2

Medical industry PE: 15-18

Ordinary shares : 482,788,906

NAV (excluding Intangible) = 36,648,000

Price / NAV = (0.3 x Ordinary shares) / 36,648,000 = 4.0

AEM 1H21 (SGD4.02, 16 AUG 21)

AEM 1H21

It's been awhile since I wrote previous article. Lazy bugs were biting me resulting I'm not able to write the article. Ok, stop nonsense. So, how is the result for AEM 1H21? Let's take a look. 

Financial Report

Looking at the picture with 4 red circle then we probably know what's the results. Revenue dropped 30% and Profit almost drop half compared to 1H20. If we read back to previous report, actually management team has informed us that 1H20 will not get much order and customer ramp their production in 2H20.

Balance Sheet

Intangible assets increased almost 50 percents, and 25 percents of total assets. Need to beware of this, if next quarter still increase then may need to consider to drop this stock. I have phobia on the intangible assets. Besides that, cash and cash equivalents drop almost 50 percents.

Financial Liabilities = Loan x 3 , important thing must say 3 times !!! Cash drop and loan increase significantly. High Alert and need to beware of this. Cash drop 64mil and loan 60mil !!!

Cash flow 

CFO is negative!!!! Increase in inventories and payable resulting CFO negative. 

If we look at CFFI, AEM has aggressively acquire PPE roughly 52mil. Need to be aware of the negative CFO. 

Forecast

As mentioned early, AEM management expect a strong uptake in 2H21. Let's wait for 2H21 results! 

My thought:

Company aggressively expand causing decrease in cash flow. For 1H21, definitely the financial report is not comparable to 1H20 and CFFO is negative. Need to take note of the 2H21, if the report is not good, we need to give up this stock as I would consider this as integrity issue (Strong uptick in 2H21). 

Not to forget their target this year is 460 ~ 520million

Frontken - Share Price 2.98, Fair Price - (29 May 2021) - FAIR PRICE - 0.856

 Introduction

A service provider of advanced precision cleaning and surface treatment for semiconductor process chamber parts and repair and maintenance services for the oil and gas industry.

Financial Summary

In Year 2020 AR, Frontken mentioned that the Oil and Gas sector due to Covid is delaying the repair and maintenance. Although YR 2020 has lockdown, the company still able to generate high revenue. 

Segmentation

Customer mainly on Taiwan and Semicon is the biggest contribution to the group revenue. 

Total Revenue - 368mil, taiwan contributed - 63percent of the revenue. 

Major customer - TSMC , contributed 132mil, 35percent of total revenue! 

Forward looking

The company is optimistic on the future prospect. 

Q1 2021 Report (Jan to Mar 21)

Income statement

First glance at this report, nothing to criticize. Revenue increased 22 percent and PBT increased 42 percent. Profit margin before increased from 30% to 34%. 

Balance Sheet 

Cash rich company with 300millions on hand with no debt. NAV remains the same. 

Healthy cash flow, generate positive operating activities and FCF. 

My opinions

Current price - 2.98

EPS  - 2.19 x 4 

P/E = 34 

Dividend - 0.04 

Dividend yield - 1.34% 

Fair value with 13percents CAGR - 0.856.

Overvalued stock, major customer TSMC contributed 35%. 

Very important to look at CAPEX, due to technology change everyday, company need to keep upgrade their technology to ensure they able to follow to trend else will be eliminate by other competitors. 

PENTAMASTER - PRICE 5.75, fair value - RM3.73

Introduction

Penta is a ATE company, they provide solution to others company thru the test equipment and the ATE business contributed 68% and Factory Automation solution (FAS) , industry 4.0 contributed 40% of the revenue in 2020. Penta planned to get ISO13485 cert by 2021. 

• Electro-Opto Smart Sensor 

• Automotive Semiconductor 

• Single-Use Medical Devices 

• Consumer & Industrial Products

Financial Summary

Year 2020 revenue and profit drop due to Covid issue. For the chart, we can observed that the revenue and PAT keep increasing. 

Segmentation

Penta has newly created a new station called MedQ is for medical devices. Strongly believed that the medical devices dept will grow. 

 

Balance Sheet

Look at the balance sheet, the trade receivable is indeed worrying as it grow 2x compared to 2019 where the revenue drop but receivable is increase drastically. Meanwhile, the trade payable also increased 2x. The company is in net cash position. Company has a healthy cash flow.

My thought:

Price:5.74

PAT: 112,258,000

Profit attribute to owner - 70,885,552

Ordinary shares- 712,317,121

Equity - 705,303,748

EPS - 0.099 (2020)

EPS (2019) - 0.11658 x 20 (PEG) or (32) = 2.33 or 3.73 (Fair value)

P/E - 58

ROE - 70,885,552 / 705,303,748 = 9.9

2019 as base

2Y Growth EPS - 20

3Y Growth EPS - 32

5Y Growth EPS- 90

Singmedical (18 Apr 2021) - 0.345

 Financial highlight

Year 2020 definitely not a good year for SMG. With the pandemic and circuit breaker from 7 April 2020 to 19 June 2020, non-essential business must close down. Revenue and profit will definitely impacted , moreover some of the business for SMG is dependent on overseas patients, contribution of foreign patients is about 15 to 20 percent for group revenue. With all the restriction, overseas patient unable to come in to SG. 

Support by government and rental is about 4.1million else the net profit will drop 64percent compared to 2019.

Paediatrics - 7 clinics

Astra Women’s Health - 12 clinics

Cardiac Centre - 1 clinic

Diabetes & Thyroid - 2 clinics

Lifescan Imaging - 2 clinics

Lifescan Medical center - 2 clinics

Lasik - 1 clinic

Urology - 1 clinic

SW1 - 2 clinics

The breast - 1 clinic

Cancer - 1 clinic

Dental - 3 clinics

O&G - 2 clinics

Wellness and Gynaecology - 1 clinic

Financial Statement

Revenue dropped 8 percent and profit dropped 33%. In 2H 2020, business almost going back to normal. Other loss 3millions because impairment loss for Paediatrics Business Unit

2H 2020 - 48,395

1H 2020 - 38,945

2H 2019 - 50,029

1H 2019 - 44,643

The revenue heavily impacted in 1H 2020, else the business will revenue will remain the same. 

Balance Sheet

This is the mistake that i've made during my initial investment. Intangible assets is 65percents of Total assets, is very risky. Cash less 1.6million, and borrowing less 400k. 

Cash Flow

With the pandemic, company still able to generate positive cash flow, nothing to criticize. Company keeps paying off the loan, which is a good sign. 

My thought

Pandemic will be over one day, medical tourism will back to normal. Earning will back to normal as well. But be aware of the earning, for this type of company, they will only M&A to grow the company. 

This is the main risk which I didn't realize when I bought in 2017. 

GREATECH - (17 Apr 2021) - RM5.95 , FAIR PRICE - RM3.59

About

This company helping other companies to setup automation. 

Revenue

Total revenue for 2018 ,2019 and 2020is 219 millions, 215 millions and 261 millions. 

As we can see that the revenue is keep increasing. 

From the chart, clearly see that most of the revenue contribute from America follow by Asia and Europe. 

Balance Sheet

From the balance sheet, cash is increasing and the borrowing is reducing. Which it is a good thing for the company. Trade receivable is increasing but payable also increasing. Cash rich company. 

Revenue increased 20 percent despite the pandemic. Profit increased 35millions. 

Cash flow normal. 

My thought

With 5G trend, lot of companies will going into automation. This will benefit the company. 

But with the technology keep changing, company need to keep upgrading itself to stay competitive. 

Current price - 5.95

Earning - 0.1403

P/E - 42

ROE - 33 (3 year avg) 

CAGR EPS  from 2018 to 2020, 40 percent

This company in growing stage, no dividend was given. High growth company but is that sustainable?

For me, this company is overvalued. 

MI Technovation - (RM3.99)

Financial

During 2018, PBT lower than 2017 due to one-off IPO expenses incurred during the year and higher sales and marketing expenses to promote our new range of equipment. 

Business

OSAT (Outsourced semiconductor assembly and testing) BIG 4 - INARI (customer broadcom and osram), MPI and Globaltronic (optotronic)  and Unisem 

ATE (Automated testing equipment) - Vitrox (IC, battery module), Penta , MI Technovation (Customer - AST, Utech, Amco, TSMCO) and Greatech (Solar panel / module (customer - First solar), battery automation, medical tube,consumer electronic (Customer - panasonic) )

Financial Q4 2020

Net cash company. Balance sheet healthy. 

Receivable a bit risky, is 23% of total assets. Besides that, the revenue for the year is 229 millions but the receivable is 102 millions. Need to take note of this. 

Cash flow statement no issue. 

Prospects. 

My thought

Lots of ATE company in Malaysia and it is very competitive. The company trying to expand into industrial 4.0 which is the future trend. If it successful then it will be a bonus and the company will continue to grow. 

Revenue 2020 : 229,004

EPS : 0.07241

P/E = 55

ROE= 13.9