PNE Industry

PNE Industry (BDA)

http://www.pne.com.sg/industries/index.html

I bought this share @1.055 for 3.1lots and 1.065 for 2.8lots. The website above is their official website, which doesn't have an investor relation page! I rarely buy this type of company but I found this one is a value stock. After I bought this share the price shoot up very fast. Heng I bought it.. Actually I was monitoring this share since it was 0.8, and due to my poor trading skill, I thought in short term it might drop around 10% so I wait for it to drop. But the fact is.. it slowly went up.. and a good result made it gap up to 1 dollar plus! Actually on the day I bought it I was quite busy in Italy Arezzo and the internet is not very fast (yes their 3G super slow and unstable which is another reason why I stop trading), and the bid ask spread was quite huge. But my girlfriend told me: you always like that always hesitate, I bet you will regret again as usual if you don't buy it! At the end of the day she is right! Anyway it is not the first time I hesitate to buy due to my "poor trading skill", or poor anticipation. So thanks to my gf now PNE is finally in my portfolio after so long.. and it closed at 1.185 on friday lol.. 

PNE Industry is listed on SGX main board since 2000, I have attached a chart from yahoo finance below: 

As we can see from the chart, the company's share was active for around 3 years before it went down to its bottom, and the share was trading around 0.3 for more than 10 years with low volume (price after consolidated). Even 2007 bull market and 2008 bear market didn't have very strong impact on the share price too. The company started to distribute its earning every year since 2007. As mentioned in the previous post, I prefer to invest in those companies which are willing to share its earning with their supporters! Their company's dividend history is as follows, I got this data from https://www.dividends.sg/view/P07 as usual so please forgive my laziness... (I manually adjusted the yield by dividing the dividend by the share price on 1 Jan of each year, the effect of consolidation is included)

Year	Yield	Amount	Ex Date	Pay Date	Particulars
2017	13.95%	SGD 0.07	2017-05-29	2017-06-09	SGD 0.07 ONE-TIER TAX
		SGD 0.02	2017-05-29	2017-06-09	SGD 0.02 ONE-TIER TAX
		SGD 0.03	2017-02-02	2017-02-20	SGD 0.03 ONE-TIER TAX
2016	12.28%	SGD 0.03	2016-06-01	2016-06-16	SGD 0.03 ONE-TIER TAX
		SGD 0.02	2016-06-01	2016-06-16	SGD 0.02 ONE-TIER TAX
		SGD 0.02	2016-02-03	2016-02-19	SGD 0.02 ONE-TIER TAX
2015	11.42%	-	2015-08-03	-	SHARE CONSOL OFFER OF 1 FOR 4
		SGD 0.005	2015-05-27	2015-06-12	SGD 0.005 ONE-TIER TAX
		SGD 0.005	2015-02-04	2015-02-16	SGD 0.005 ONE-TIER TAX
2014	32.95%	SGD 0.02	2014-07-18	2014-07-31	SGD 0.02 ONE-TIER TAX
		SGD 0.005	2014-05-14	2014-05-30	SGD 0.005 ONE-TIER TAX
		SGD 0.004	2014-02-06	2014-02-21	SGD 0.004 ONE-TIER TAX
2013	4.21%	SGD 0.004	2013-02-06	2013-02-25	SGD 0.004 ONE-TIER TAX
2012	5.88%	SGD 0.003	2012-02-01	2012-02-28	SGD 0.003 ONE-TIER TAX
2011	3.16%	SGD 0.003	2011-02-09	2011-02-28	SGD 0.003 ONE-TIER TAX
2010	3.33%	SGD 0.0025	2010-02-03	2010-02-26	SGD 0.0025 ONE-TIER TAX
2009	4%	SGD 0.002	2009-02-09	2009-02-27	SGD 0.002 ONE-TIER TAX
2008	2.35%	SGD 0.002	2008-02-05	2008-02-22	SGD 0.002 ONE-TIER TAX
2007	2.63%	SGD 0.0025	2007-01-26	2007-02-12	SGD 0.0025 LESS TAX
2002	0.00%	-	2002-08-20	-	1WT FOR 4SH OFFER OF 1 FOR 4
2001	1.23%	-	2001-08-23	-	NONRENOUNCEABLE OFFER OF 6 FOR 10 @ SGD 0.43
		SGD 0.05	2001-03-02	2001-03-27	5% LESS TAX

As we can see, the yield is on uptrend. Especially recent yield is increasing while the share price is on uptrend! So now we must consider whether the dividend is sustainable or not? Is it a value stock or value trap? 

I stated the top 20 shareholders of the company below:

Ah huh, as stated in the annual report 2016, the free float is only 16.58%. Little free float means there are little shares in the market and sometimes it might be hard for you to get the share (especially if you want to buy high quantity), and normally you need to spend more as the bid ask spread is huge. The big gap happens to me too. I spent around 5% extra money then the bid price to get my shares of PNE industry. However as most of the top 20 shareholders should came from the same family (I couldn't find any info online but since most of their names are so similar so I assumed that they are from one family) and they are also the top managers of the company, I found this little free float also means the managers are confident with the company future performance, and they have good control with the company too (sometimes even though the manager got some wonderful ideas but if most shareholders disapproved the manager can do nothing about it too). 

I also attached the remuneration of directors below: 

This is another important part to me too. As some managers are working for their self-interest, I am always quite concern with their salary and bonus. PNE Industry directors are getting paid reasonably compared to the company performance. I believed these people are getting their award from dividend of their shares. Another good thing about the management team is that most of the directors are working in the company for very long time. Stable and experienced management team is good for company growth (if the company is not doing well new managers might be more preferred). 

The company got two business segments - contract manufacturing and trading. The types of products sold under contract manufacturing segment include electronic controllers and other electrical and electronic products. The types of product sold under trading segment include emergency lighting equipment and related products. The group's income came from a wide range of country, however around 48.5% of income came from two major customers. The company closed one of their subsidiary called PNE Print Technology Co., Ltd, which manufacture and sale of printing materials and related products in China. The other subsidiary in China which manufacture electronic and electrical products are still in operation. Below is a 2 years chart of CNY to SGD. Since one of their major customer might pay them in CNY, I expect that the FX should have big impact to the company earning, since CNY to SGD drops more than 10% in 2 years, I also attached the geographical information of the company earning:

I have attached the half year result which announced on 12/5/17 below:

2017 half year result shows that the total comprehensive income for the period drops 18.7% compare with last year. However, I found this result is quite good. Why? We can see that the company got 305,000 profit from discontinued operation last year, which is 0 for 2017, but total profit for the period still up 14% if don't consider the other comprehensive loss. The company made a 1,321,000 other loss in the reporting period, and 1,160,000 came from exchange difference arising on transaction of foreign operations. The company explained in their half year result that such loss is mainly contributed to the weaker Ringgit, which resulted in a loss upon translation of the groups's operations in Malaysia. The half year earning per share is 7.4 cents and net asset value is recorded at 99.2 cents. The company got no borrowing (i love it!) and no intangible assets, so I found the quality of the balance sheet is quite good. At the current price the company is trading at PB 1.194 and PE 16 (half year earning only). Earning per share in 2016 is 10.5 cents (full year result) so half year earning accounts for 58.57% of full year result, so if such ratio is still valid this year, 2017 full year result should show that the company PE is around 9.379, which shows that the company is relatively cheap to me. However this year total dividend payout is 12 cents, so the company might pay out more than 90% of their earnings, which is not very ideal to me. 

I don't really do industry analysis as I found it is really difficult to do so because it requires alot of knowledge. As I got many different counters in my portfolio doing industry analysis is very hard for me. I will add some TA below:

It is a weekly chart from ChartNexus. Currently the counter's RSI is at 88.1%, which is at overbought region. However I noticed that previously when the counter is trading above 70% RSI, in the next few weeks there will be a correction, but usually less than 10% drop! Another thing is the company XD date is on 1 June according to their announcement on SGX (yes it's annoying that the company doesn't have an investor relation page. It is quite rare for me to buy into this kind of company but since it is listed for so long and got good history I chose to believe the company and its management team) After XD date the share should drop around 9 cents to reflect XD, which will bring RSI down too. From the chart the counter is on mid-long term up trend and it broke resistance @ 0.88 and 0.955 few weeks ago, which is a good sign indicates that the trend should continue. 

Conclusion, so the current price did not full reflect the company total value to me (good), and the company is willing to share their earnings with shareholders (good). However, the dividend payout ratio is too high to me (bad). The balance sheet quality is good to me as the company got 0 bank borrowing (good), and current ratio is 5.86 with almost 0 non-current liability (good). The cashflow is healthy (good) and the company profit is increasing if we ignore the forex changes (good). Bid-ask spread is big (bad) which made it harder to trade (good). I like boring company with boring business but can generate good cashflow and dividend! The TA is good (but take note that my TA skill is not so good lol) The company's earning came from many different countries (good) however around 50% of total revenue is contributed by 2 major customer (not so good). Current PE should below 10 (good) but PB is slightly above 1 (not so good). 

Anyway as stated above, I am vested into this company. I am planning to receive my dividend and reinvest it to grow my stakes. However trading is not recommended for this company even TA looks good to me due to big bid ask spread. so... 

Wish yall huat!