Apologies for the delay in updates for this one. This is a really small position for myself but is no excuse to not keep up to date with. I will have to decide whether to up it or to pare it soon.
Financials
- FY results, profits halved from $8.5 to $4.1m with a topline rise of 19% and COGS of 43%
- Cash went from $33m to $22m largely due to
- dividends paid out of $7.8m and capex for the new auto plant of $4.7m
- Debt is now $1m and finance leases of $1.8m
- Firm bought back $1.6m worth of shares from the market as well
Operational
- Cheaper imports and rising S$ continues to tighten margins
- Precision engineering and electronics is still the main business core vs. construction
- Aluminium prices, labor costs are the main costs
- The new China Auto plant is pending approval and estimated to start in 2H 2011.
Others
- There was a weakness in prices when the auditors issued a qualified opinion on the firm
- This is in relation to the convertible bond to M2B of $3.2m covering over $200m of assets
- M2B has entered into several agreements, one of which to Qtrax, the world's largest free legal music site, major in China, Indonesia and Malaysia.
- Im confident the loan is well covered and AEI is adopting a wait and see attitude to loan conversion
- I am also not bullish on the new venture, which requires a gestation period and probably works on monetizing ad revenues while allowing users to connect and download free music/videos. Anyway, if venture fails, M2B fails, AEI will have a very high chance to get back the $3.2m in cash.
- If M2B becomes wildly successful, AEI will convert to equity and participate in M2B, bringing in new cashflows.
- In whole the qualified opinion is definitely not negative and price decline is unwarranted
- I will wait for results of the new China plant to decide if I should make any changes to the position.
"To make large returns from a small capital base, you need to be a plunger."
1 comments:
Still nice material.
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