DSWL - Deswell Industries

[aws]

From the SEC:

 

Annual Reports — foreign private issuers file annual reports on Form 20-F. Foreign private issuers are required to file Form 20-F within four months of the end of the fiscal year.

 

Other Reports — foreign private issuers meet their other reporting obligations under the Exchange Act by filing reports on Form 6-K. Quarterly reports are not required.

[abitofvalue]

From the SEC:

 

Annual Reports — foreign private issuers file annual reports on Form 20-F. Foreign private issuers are required to file Form 20-F within four months of the end of the fiscal year.

 

Other Reports — foreign private issuers meet their other reporting obligations under the Exchange Act by filing reports on Form 6-K. Quarterly reports are not required.

 

um.. they are not required but DSWL has filed quartlies all along.  No reason to think they will suddenly stop. 

 

I followed up on this a few days ago and it will be filed later this year. The IR guy said it was going to be later in the year (post-christmas / pre-new years).

[kab60]

Chairman keeps buying. Almost 20 percent stake now. Nothing new om Behringer?

[DTEJD1997]

Hey all:

 

Anybody notice that sales & earnings continue to improve?  While they are improving, they are kind of moving at a snail's pace.

 

Dividend also got cut a quarter ago.

 

Is there still any interest at all in this?

[matjone]

I still hold it.  I remember being kind of suspicious what their plans were.  They kept racking up losses and insiders kept buying so I was kind of worried they would eventually try to take outside holders out at an unfair price.

 

I wish they'd suspend the dividend altogether and put it towards a buyback.

[aws]

They've drifted down toward all time lows.  It looks like the latest drop was because the chairman discontinued buying shares.  Previously he had been something like 1/3rd of the total volume traded according to the monthly SEC filings.  He held the stock in the 1.75-1.80 range for quite a while with all those purchases but I guess with all the turmoil in August he ran out of available funds to keep buying.

 

Their last quarter showed higher revenues but also much lower margins so they are still losing money.  The dividend is still 3.5 cents, which is now over 9% annualized, but with no profit that's just a return of capital.  At 30% of tangible book value with a dividend and not too fast of a cash burn this looks cheap enough to still want to be involved.

[NeverLoseMoney]

It's a nominee for the Soggiest Cigar Butt of the Year Award for sure. I have a small position.

 

More and more I believe what Deswell does can't be done profitably in that part of China anymore. Large minimum wage increases have eroded margins. They have been trying to turn things around for a long time now and I just don't see them succeeding at this point. Maybe a company with larger scale can operate profitably. Perhaps they can sell their operations to a larger operator and liquidate? That seems to me the best case scenario.

 

Their capex has been minimal, but I don't think the ~$900k capex per year they had in the last 3 years is sustainable. The only other slight positive that I can find is that Mr. Behringer owns a 6.2% stake.

[aws]

I added some more shares Friday and Monday with the recent drop putting the stock below 50% of NCAV.

 

According to a new edgar filing yesterday the chairman bought another 185k shares, giving him 26.3% of the total shares outstanding.  The shares were bought over a 2 month period between Sept 8 and October 27.  The one month break between his purchases from August to September resulted in the price dropping from around 1.75 to 1.50.  And then it dropped down to 1.30s this week, with the fall starting on the 28th (the day after the last reported purchase date).  Someone is selling a big quantity of shares, at least relative the normal volumes for this stock, and they don't seem to care what price they get for them.  If the chairman isn't there to mop up the sales then the price just collapses.

 

 

[writser]

Crazy volume (and volatility) last friday and today. I wonder what's going on.

 

edit: new filing. Chairman bought most of the volume last week.

[WneverLOSE]

IMHO the stock is definitely underpricing the company's assets but when trying to look at it from the opposite direction I am trying to understand if the stock should trade closer to its true assets value.

 

if the stock was "moderately" undervalued, Richard Pui Hon Lau wouldn't try to accumulate so much shares because he will not have any profit to make after the fact so the asset's value will never be materialized, so we can't make money from rising stock price.

 

if the stock price is "truly" undervalued, what gives us as small position investors confidence that Richard Pui Hon Lau wouldn't buy us out at greater discount to IV then we entered the thesis ?

 

one more thing, if I was Richard I would stop paying a Dividend, by so doing the following :

1) Dropping the share price due to the fact that many "high yield" income investors will dump the stock, and buying it cheaper.

2) Retaining the money so I can take it all when I take the company private.

 

when he will accumulate 51% of the voting rights he will take the company private at a ridiculous price, that's what I would do.

 

I am truly hoping someone smarter than I could explain why am I wrong because beside of the fear the I will be taken out at a lower price then entering I love this investment.

 

 

 

[Travis Wiedower]

Andrew Walker (whopper) wrote a short post about Deswell a couple weeks ago. He pointed out some "weird" things in the financial statements which I hadn't noticed when I was briefly looking at the company. Here it is: http://seekingalpha.com/article/3658216-investing-with-an-edge-deswell-industries

[abitofvalue]

Changing the record date is strange but to be fair it was disclosed appropriately so no one should have suffered a loss due to it. It was originally supposed to be June 26(record date) to be paid out on July 16. On June 24th they said it would be July 6th and still paid on July 16.  Why is this sketchy? I mean sure it allowed the chairman to buy shares and receive a dividend soon after but the shares don't go ex-dividend till the record date so presumably he paid for the dividend in the price of the stock. I mean had they changed the record date after the fact that would be sketchy (and probably illegal) but otherwise what's the harm? I guess I am not seeing who suffered or was wronged.

[aws]

I wonder where all the shares the chairman is buying are coming from.  One block trade alone last week was for 373k shares which is around 2.5% of the company.  Who would own so much of the stock to be selling like that but not also be required to disclose it in SEC filings? 

[WneverLOSE]

Hi,

 

since Richard Pui Hon Lau keeps buying I try to understand what are the rules regarding an insider taking the company private.

 

1) If an insider buys 51% of the company, can he call a vote to take to company private and vote his shares in favor ?

2) As I understand it, he has to get 51% of the votes that are not held by insiders, if that's the case, 11m shares are held by 10 "people" and all the others shares are held by about 3,000 other investors. as I understand they can make a tender offer, and if there will be less than 300 or 500 holders they can take the company private.

 

does anyone have any idea if I am understanding the situation correctly ?

[aws]

The stock is doing pretty well lately.  The loss has narrowed and revenue has grown per today's quarterly filing, the dividend is still there, and the chairman has continued to load up on shares.  He now owns about 1/3rd of the total stock.  Until recently his purchases were only enough to stem the drop in price, but it at least appears that the big seller is finally done. 

 

I don't know that they will return to profitability, but return to $2 - $2.25 range certainly seems quite plausible since that would still be under half book value.  In any case I'm feeling good that I doubled down this year and brought my average cost to under $1.30.

[writser]

The stock is doing pretty well lately.  The loss has narrowed and revenue has grown per today's quarterly filing, the dividend is still there, and the chairman has continued to load up on shares.  He now owns about 1/3rd of the total stock.  Until recently his purchases were only enough to stem the drop in price, but it at least appears that the big seller is finally done. 

 

I don't know that they will return to profitability, but return to $2 - $2.25 range certainly seems quite plausible since that would still be under half book value.  In any case I'm feeling good that I doubled down this year and brought my average cost to under $1.30.

 

Congrats with (what looks so far to be) excellent timing. I also bought little bit more the past few months but my cost basis isn't nearly as impressive. Today I trimmed my position a little bit. My price target is somewhere around $2.50- $3. Possibly higher if they manage to turn the ship around but so far I am skeptical about that.

[DTEJD1997]

hey all:

 

One thing that I've been thinking about lately...

 

If China devalues the RMB, DSWL is going to have an easier time with labor & export costs.  Their competitive situation should improve vs. other countries competitors.

 

Of course, if other countries devalue their currencies, then the advantage will be short lived.

[abitofvalue]

Stocks down well recently though performance is still the same. Not a net net anymore.. but not expt either. Anyone still holding?

[writser]

I sold a while ago. Obviously way too early! Stock is up significantly yet the dividend was cancelled because the company wants invest more in their (afaik) terrible manufacturing business. Maybe Lau Pui Hon has a more optimistic view of the future (he probably knows more than I do) but I'd rather have them do something else with their cash ..

[watsa_is_a_randian_hero]

Earnings out today....looks good but dividend is cancelled?  Makes me wonder???

 

What is the likelihood the earnings are real?  What is the likelihood this is a fraud?  My assumption is for any chinese company is that if there no dividend, the likelihood of fraud is high.

[DTEJD1997]

Earnings out today....looks good but dividend is cancelled?  Makes me wonder???

 

What is the likelihood the earnings are real?  What is the likelihood this is a fraud?  My assumption is for any chinese company is that if there no dividend, the likelihood of fraud is high.

 

The chance of this being a fraud is very close to zero.

 

Please check the history of the company.

 

 

[NeverLoseMoney]

Earnings out today....looks good but dividend is cancelled?  Makes me wonder???

 

What is the likelihood the earnings are real?  What is the likelihood this is a fraud?  My assumption is for any chinese company is that if there no dividend, the likelihood of fraud is high.

 

The chance of this being a fraud is very close to zero.

 

Please check the history of the company.

I agree. Deswell has been around for a long time and has returned a lot of cash to shareholders over the years. Also note the large insider buys by the chairman in the last few years. He now owns 45% of the shares. A much bigger risk is him taking the company private at a bargain price the next time the business goes through a slump. That said, it is weird they cancelled the dividend and I can't really explain that either.

 

Congrats to those who held on to this one. I gave up on this company a while ago, but they did finally see a nice uptick in their business.

[writser]

Looks like the Robin Hood crowd decided that DSWL is their pump of the day (it was about time!). I was a bit late to the party, but still trimmed my position a little bit. Probably a good idea to keep an eye on this the next few days if you are a bagholder too. More strange things could happen.

[aws]

Looks like the Robin Hood crowd decided that DSWL is their pump of the day (it was about time!).

 

I think that honor goes to HUSA.  Some of them are pumping AMPY too, which I don't mind since I'm in that one, but doubt they'll stick around long enough for it to matter to me.

[writser]

I'm probably an idiot - what is HUSA?