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Quick Take on Pertama Holding:Delisting Fails

We mention this great stock called Pertama Holdings that runs the Harvey Norman chain in the past [Analysis here >>]. First spotted at 47 cents, its majority share holder Harvey Norman Group wants to take it off the market. However it looks like they have failed in their effort.

  1. Harvey Norman Group raise their stake to a formidable 83.15%
  2. The recent purchase was done at 65 cents.
  3. Proposed delisting of Pertama was shot down at an EGM.
  4. Under SGX rules, the controlling shareholders of PErtama were not required to abstain from voting. The largest minority investor in Pertama is US based fund management Fidelity International, which holds over 22 million shares, or 9.1% of the company. The exit offer lapsed on Sept 26.
  5. Pertama Shares advance as much as 75 cents on the back of a special 1.4 cents special dividend.
  6. Revenues remain strong growing at 5.6% and a 32.5% rise in profits.
  7. NAV is at $107 mil or 44 cents per share.
  8. Based on current DPU of 6.4 cents which includes a special dividend of 1.4 cents, the yield is 9.84%
  9. A more reasonable estimate is 5 cents, which will yield 7.7%

Quick take from recent 2011 Annual Report

  • Latest outstanding number of shares is 242 mil
  • Gross Profits grew 17%. This shows growth in core business
  • Inventories, Receivables stayed the same while Payables were higher. This indicates a good maintenance of cash conversion cycle [Definition here >>]
  • Cash holdings remains steady at 78 mil. But it is likely it will be down owing to this 1.4 cents of special dividend payout
  • A 1.4 cents additional payout should drain 3.38 mil from this cash holdings
  • Zero debts
  • Free Cash Flow improve from 7 mil to 11 mil
  • Out of Free Cash Flow, 12 mil was paid as dividends (2011). This is higher than free cash flow but still within acceptable limits
  • Compare to 2010 where on a free cash flow of 7 mil they paid out 5.8 mil in dividends.This should be equivalent to 2.4 cents in div. At 65 cents, the yield is 3.7%
  • Since 2007, Pertama have been paying out 2.4 cents in div for the 3 years before the ramp up
  • The main growth area was the contribution in Malaysia which went up from 1.3 mil in gross profit to 5 mil in gross profit. Singapore profits stayed largely consistent

For investors hunting for yield, I missed out entirely on this because I though I could get it cheaper. The buy up from the owner have indicated they value Pertama at 65 cents. Obviously Fidelity International likes the business a lot and think it could be value at more.

This stock is very very very illiquid so you may be trap in this stock should you get invested and not exit at a price you want. That said it may mean the stock will hold up well in these volatile times.

For investors like me,

  1. We want to see that since this recent developments, whether the earnings are due to very favorable demand that will not be repeated.
  2. Whether the potential to grow even more is there. What will be the key drivers.
  3. A DPU of 5 cents on current share price looks a good yield.

I run a free Singapore Dividend Stock Tracker . It  contains Singapore’s top dividend stocks both blue chip and high yield stock that are great for high yield investing. Do follow my Dividend Stock Tracker which is updated nightly  here.


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Monday 28th of November 2011

Hi Rookie i think i did my calculations but i may be wrong let me relook it again.


Monday 7th of November 2011

Hi Drizzt, Isnt the current DPU is 5.4 cents including special div? I didnt think its 6.4 cents as you mentioned. Rgds,


Wednesday 2nd of November 2011

For a period of time they had less than 10% of the stock in public hands, and there was talk that they may be forced to delist as they fail to meet this regulation.

So unfortunately I sold off my entire stake at 0.65 before the further run up in price, fearing that there wont be a market if it got delisted.

On hindsight, it'll be much better to hold on to it. I stopped following pertama after selling off, not sure how they have managed to fulfil the criteria of a minimum stake in the hands of public shareholders.


Thursday 3rd of November 2011

hi GF, its good that you made a tidy profit from it. but the illiquid nature works for the management and long term share holders. not really good if u are thinking of exiting or legging in. you can find it hard to hit the price you want.

whats the rational of selling it off?

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