Opportunity for short-term trade. If you buy the stock before 4 November 2011 and are willing to hold it until after 9 November 2011, you will still get an attractive dividend. Yes, Amtek’s last results were disappointing and the outlook is not promising but shareholders can still look forward to a $0.055 per share dividend (55% of FY Jun11 earnings). Also, the threat of a stock overhang has reduced now that Capital Group has exited and the stock is half of its $1.30 IPO price.
Our view
Low risk of further stock overhang. Capital Group left the stage just last month after Temasek bailed out earlier in January. Capital, which had bought into the stock via open market transactions shortly after it was listed last December, reduced its stake to below 5% on 1 September after building it to 7.1%. In contrast, Standard Chartered Private Equity, one of the two investors who took Amtek private in 2007, has been rebuilding its stake to just under 30%.
Pale shadow of its IPO self. Today, Amtek is trading at just 6x historical EPS and 1.9x book compared to 27x historical EPS and 4x book at the time of its relisting (offer price was $1.30). Other than the general market sell-down and the general consensus that its IPO price was too expensive, one other reason could be its below-consensus full-year earnings, which were hit by the stronger US$ and higher raw material costs.
But cash flow remains strong. Despite missing expectations last year, Amtek generated positive free cash flow of US$30m that took net gearing down from 0.9x in FY Jun10 to just 0.1x. It also ringfenced 55% of earnings for dividends, in line
with its 50% policy. With only US$20-25m in capex expected annually, future dividends should be secure.
Business
Provider of end-to-end EMS solutions.
Key ratios…
Price-to-earnings: 6.4x Price-to-NTA: 1.9x
Net gearing: 0.1x Return on equity: 32%
Dividend per share / yield: S$0.055 / 8.1%
Share price S$0.675
Issued shares (m) 543.2
Market cap (S$m) 366.7
Free float (%) 39.8%
Recent fundraising activities Dec 2010: IPO at $1.30, 200m vendor shares
Financial YE 30 June
Major shareholders Metcomp (30.3%), StanChart Pvt Equity (29.9%), Mgt (5.3%)
YTD change -46%
52-wk price range S$0.58-1.37
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