Share price: SG$0.225
Projected Dividend per share: SG$0.017 | 7.55% dividend yield
Outstanding number of shares: 349 mil
The last time I noticed King Wan was some time ago when DMG came up with a report stating that King Wan, after the IPO of their stake in their Thai sugar subsidiary investment, now called KTIS, they would be able to sell all the shares, and slowly supplement their existing M&E business to provide a 10% yield.
Price shoot up from $0.20 to $0.29 cents.
Somehow, I always felt something is a-missed. When the share price have risen so much, after all the news, are there still value in Kingwan at $0.26-$0.29.
I gave up really, cause I am the lazy sort. There is just too much stuff to play around for King Wan. and that is why that DMG report was great because it attempts to put together everything:
- it has an M&E business
- a stake in KTIS that is giving it dividends
- it owns a ship and chartering out
- it is in a JV with properties
- now it is in the dormitory business
That is a lot of stuff to digest. If you do not want to digest, then just digest and trust the analyst. One of the things that the article seem to indicate is that for the M&E to be so matured, they do not need much capital expenditure or future investments. That might be true.
However, it does give us a feeling that the M&E will be able to provide the profits for some time going.
When we look at the past revenue of only Plumbing & Sanitary, Electrical, Toilet Rental and Painting in the past, which are King Wan’s main competency, it does look very erratic, and only happen to do better post 2010.
If this is correlated to the housing boom in Singapore, I do not see this happening considering much of 2006 and 2007 there should be much development works.
Due to operation expenses, there seem to be a need to maintain at least SG$60 mil in earnings before tax for the segment. While the composition have shifted, if you study the segmental (not displayed here) the main profit contribution of plumbing and electrical are cyclical.
If you have purchased King Wan at $0.29 and are looking for a 5% yield, the dividend payout would be $0.0145.
Here is the past calendar year dividend history:
- 2015: SG$0.01 (half year)
- 2014: SG$0.022 | SG$7.6 mil
- 2013: SG$0.015 | SG$5.2 mil
- 2012: SG$0.015 | SG$5.2 mil
- 2011: SG$0.013 | SG$4.5 mil
- 2010: SG$0.00786 | SG$2.7 mil
- 2009: No dividend
- 2008: SG$0.00225 | SG$0.78 mil
To pay that out they need $5 mil, which looking at this coming results it might prove to be a challenge. Still they have $5.8 mil in cash to tap, not to mentioned the various subsidiary business working out.
With the erratic earnings, I wonder if they would revert to pre 2009 situation, where the earnings is much less and dividends are much smaller. Very much think its possible. Hence the reason for taking steps to diversified.
Can they continue the trend to pay out a 1.4 cents dividend? Recent quarter earnings look good, although part of the costs is absent of director fee payment.
The current net asset value is SG$0.27 which is much higher than current share price of SG$0.225. Still the only assets available for liquidation are cash, available for sale assets (KTIS shares) and investments & joint ventures.
Net of debt, these are worth $0.075. This means, that ex of these things that can be liquidate, King Wan trades at $0.15 cents. A consistent earnings of $0.015 looks possible, if King Wan operates like the past 4 years.
If we factor in last 10 years of record, with the challenges facing Singapore due to the oversupply these 2 to 3 years, who is to say we won’t revisit the challenging earnings period where there are no earnings, negative earnings.
Ex liquidation PE 10 is possible if we are myopic and chose to ignore the past.
If this is the right stock quote for KITS, it explains a revision of King Wan’s stake from $44 mil to $38 mil. King Wan have sold some, and selling more for dividend is possible, but I wonder perhaps they would rather keep the stake for the dividend income cash flow.
There are much assets that have not been factored in, especially the property development, chartering and dorm business.
Whether is this a good investment or not, is up to you guys and gals.
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