A55.SI-Asia Enterprises Holding

[mjohn707]

Asia Enterprises is a steel distributor based in Singapore.  The company went public in 2005 and is controlled by the Lee family with a 39% interest. 

 

At the recent price of 0.21SGD per share it trades for 66% of book value, 80% of conservatively calculated liquidating value, and a 25% premium to cash and investments per share of 0.17SGD.

 

Over the last 8 years ROIC has averaged 13%.  Earnings in 2012, 2013, and YTD2014 have been much weaker, driven by reduced gross margins and sales coinciding with difficult conditions in the steel industry.  I believe that earnings will recover when conditions in the steel industry improve.  Management claims that the company has a 40 year history of profitability.

 

The company has no debt and a policy of paying out 40% of earnings as dividends.  Executive pay seems reasonable and they don’t issue stock options.  Share counts have been stable except for a 25% stock dividend in 2010, and inventory and receivable balances have been relatively stable as a percentage of sales over the last 8 years.

 

I think it’s worth about book value based off of the historical ROIC.

 

The company trades on the Singapore Exchange and publishes quarterly and annual reports in English on their website: http://www.asiaenterprises.com.sg/html/ir_home.php.  I’m attaching a copy of my worksheet which includes an 8-year earnings history and a calculation of liquidating value.

asia_enterprises.xlsx

[lathinker]

mjohn,

 

thanks for positing this, in particular the worksheet. Given it is hard to find net-net candidates in this market, any idea is welcome.

I like the concept of being floored by cash/st investments on their balance sheet plus the fact that the company has no debt and so far not lost money.

 

Do you have any views on management/capital allocatin you can share? I have seen the stock dividend, but it appears they have never bought back any shares and are not paying a dividend?

 

 

[mjohn707]

mjohn,

 

thanks for positing this, in particular the worksheet. Given it is hard to find net-net candidates in this market, any idea is welcome.

I like the concept of being floored by cash/st investments on their balance sheet plus the fact that the company has no debt and so far not lost money.

 

Do you have any views on management/capital allocatin you can share? I have seen the stock dividend, but it appears they have never bought back any shares and are not paying a dividend?

 

 

 

I don't have any special insight into management, but they do have a policy where they pay out 40% of earnings as dividends.  They've never done any buybacks either.  Capex is pretty minimal and from memory I don't thing they've done any acquisitions since they went public in 2005.  I think all they've done is paid out 40% of earnings and piled up the rest in cash.