I was most curious as one of the Chinese listed stocks finally offered some decent dividends.
Maxwell International Holdings announced the following on 5th Aug 2011: First and Final Dividend. It's a First and Final Single Tier Exempt Dividend of RM0.0335 per share (Note, there are some folks who are rather picky with dates of announcements etc etc, Maxwell actually made an announcement declaring it was proposing this dividend back on 19th May 2011 (see here )
And since Maxwell last traded at 0.34 sen, I decided to look for more info.
Maxwell was the first foreign listed IPO this year and sadly there was undersubscription for its shares offered ( See Edge artice: Maxwell’s public issue undersubscribed.). Perhaps the local investors could not stomach yet another shoe company listing from China. ( Sorry but I was told that 'shoe' is not too a happening word in Cantonese )
And the share performance since listing was dismal.
Now, as we are all well aware, many of the Chinese listed companies trades at a fairly low PE and they have tons of cash. ( In Singapore, some S-Chips have traded at a PE of less than ONE and yes, there was one S-Chip with a PE of less than ONE who was later caught with the financial accounting fraud. )
But sometimes the cash is not there!
See postings: Buy That Chinese Stocks Cos Of The PE Is Very, Very Low and Want To Invest In Chinese Stocks Listed Overseas? Read This First!
For me, I could only think of one safer approach, which is to look at the cash flow and look at the interest income.
Think about it.
Here's the simple reasoning.
Say I tell you I have 200 million cash. But my interest income shows me getting a very low return for my money. Say less than one percent.
Think about it... if you have 200 million cash, would you be satisfied if your banker gives you less than one percent for your money? Logically yo wouldn't, yes?
So if I tell you I have 200 million but my interest income doesn't support such a fact... surely you would ask me a simple question : SURE BOH?
Surely you would be sceptical with my claims. Yes?
Let's look at Maxwell's piggy bank cash.
Very impressive, yes?
172 million worth of cash!!! That's a lot of cash, yes???????
Then I look at Maxwell's cash flow statement.
For the six months ending 30th June, Maxwell's interest income only show some 363,901 .
6 months only 363,901.
One year, it should be about 727,000.
Ok.. round it up... that's about an interest income of 730 thousand only.
Compare the cash... Maxwell says it has some 172 million. Ok... perhaps it's understandable that the company doesn't bank in everything into money markets. Agree?
Say Maxwell banks in 100 million into FDs?
But look at the returns... it's only 730 thousand.
Do the math. 730 thousand divided by 100 million = .....how many percent.... ?
Err... I am not insinuating anything... all I am saying is... I believe Maxwell is getting extremely low returns for its cash. Why? I don't know. But if you are an interested investor, don't you want to know why?
ps: I seriously don't know if Maxwell would go up or down... so please spare me with those auntie talks.
ps: I am seriously not insinuating anything.
ps. After reading the cash flow... I closed the pdf file.