Background: Serial System is a distributor of semiconductor parts and other electronic components. Its principal clients include Texas Instruments, Micron and Analog Devices. Its Asia-Pacific network covers China, Hong Kong, South Korea, Taiwan, India, Malaysia, Thailand, the Philippines and Vietnam. It also provides value-added services such as turnkey design, warehousing and logistics support to customers.
Recent development: As with ECS (see Hot Stock dated 28 July 2011), Serial is also in the process of applying for a TDR listing, as it hopes to get a leg up in being compared to the higher valuations of its regional peers. The plan is to issue 84m new shares, or 10% of outstanding shares, to raise about $10m, a much-needed cash infusion given that its net gearing has been creeping up to 0.75x as at June 2011.
Our view
Focused on China, looking west to India. With 29 sales offices in China and two in Taiwan, Serial derives 85% of its revenue from North Asia, with Greater China contributing 55%. The equity boost from the proposed TDR listing will allow it to tap local banking relationships that can match its local competitors. In addition, it is keen to expand further into India, a country where it currently has eight sales offices.
In investment mode. This year, Serial has completed the acquisitions of two companies (medical devices company CSS and components distributor Intraco Tech) and attempted to acquire a third company, publicly-listed IT products distributor JEL. However, the proposed acquisition of JEL was called off after it failed to obtain the required clearance from SGX.
Key ratios…
Price-to-earnings: 6.3x Price-to-NTA: 1.1x
ROE (1H11 annualised): 12.9% Net gearing: 0.75x
Dividend per share / yield: $0.01 / 6.9%
Share price S$0.137
Issued shares (m) 821.2
Market cap (S$m) 112.5
Free float (%) 51.5
Recent fundraising activities May 09: 1-for-5 rights issue at $0.055
Financial YE 31 December
Major shareholders Derek Goh (36.9%), Sam Goi (11.6%)
YTD change -9%
52-wk price range S$0.12-0.175
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