Background
Provider of comprehensive end-to-end EMS solutions that includes product design, metal stamping, plastic and rubber moulding, product assembly and other finishing services.
Key ratios…
Price-to-earnings: 6.7x Price-to-NTA: 1.9x
Net gearing: 0.1x Return on equity: 32%
Dividend per share / yield: S$0.055 / 8.3%
Share price (S$) S$0.665
Issued shares (m) 543.2
Market cap (S$ m) 361.2
Free float (%) 34.1%
Recent fundraising activities Dec 2010: IPO at $1.30, 200m vendor shares
Financial YE 30 June
Major shareholders Metcomp Holdings (30.3%), StanChart Private Equity (29.9%), Capital Grp (5.7%), Mgt (5.3%)
YTD change -46%
52 week px range S$1.37-0.58
Up-to-date in 60 seconds
Sold down! Amtek is now trading at a sharp discount to its IPO price in Dec 2010 following the market selldown and share sales by Capital Group and Temasek Holdings. Today, Amtek is trading at just 7x historical EPS and 2x book compared to 27x historical EPS and 4x book at the time of the IPO. Further, it has declared a S$0.055 per share dividend (55% of FYJun11 earnings), which would yield an attractive 8%.
Our view
Earnings below consensus... Amtek posted a 109% jump in FY11 earnings to US$45.2m (FY10 earnings included US$13m in exceptional charges for the closure of overseas factories, among others). Excluding the exceptionals, we estimate core earnings were 20% below consensus. Gross margin was also weaker due to the stronger US$ and higher raw material costs.
…but strong cashflow. However, it generated positive free cashflow of US$30m during the year that saw net gearing reduce from 0.9x in FY10 to just 0.1x. It also ringfenced 55% of earnings for dividends, inline with its 50% policy. With only US$20-25m in capex expected annually, future dividends should be secure.
Net purchases from major shareholders. Capital Group sold 7.6m shares in Aug, which may have contributed to the share price malaise. However, we note that Capital has been selling across the board in recent months, most notably in stocks such as CapitaMalls Asia and SingPost. In contrast, long-time shareholder StanChart boosted its stake by 9m shares in June 2011. That may be the better signal to follow.
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