Mohd Radzian said...
- I have gone through the forum thread on ESOS and it was rightly diagnosed for 2007.
However, in 2009, due to ESOS exercise price, it will not contribute much to weakness to EPS.
That is correct. Uchi's stock price has plummeted which means that it's quite unlikey to see any ESOS being exercised.
Point for consideration was that minority shareholders did not like the huge percentage of ESOS was granted. Yes, currently we all know that there has been no exercise of ESOS due to the unfavourable exercise prices. And to aggravate the case, some shareholders had posted on Sahamas on their displeasure with how the two Kao brothers had the majority of the ESOS pie. This is something that real long term investors do not like to see.
- Current threat (2009) is global slowdown. As at end of February (2 months of 1st.Quarter), the estimated revenue is 6 million USD.
The question is , what would it be for the rest of 10 months.
Firstly I do not wish to talk revenue. I am sorry. Revenue is simply less important than net earnings. This is my flawed method.
Now regarding the figures, I have no idea where you get your data from. Here is the link (it's not a permanent link due to Bursa's webspace management) Quarterly rpt on consolidated results for the financial period ended 31/12/2008. Uchi's reported earnings was for 2008 Q4.
What matters for me is unaudited net profit for fy 2008 is at 58.748 million. Previous year it did 78.228 million.
On a q-q basis? Q3 Uchi made 12.736 million. Q4 it made 11.042 million.
I do not know about you but what it is clearly stated is that Uchi's earnings declined on a q-q basis and also on a y-y basis. (If you insist on revenue, revenue too declined)
So what can I want to expect for fy 2009?
I do not know. I would look at Uchi's main products and look at its relevancy on the face of a global recession. Yes I would use recession instead of slowdown.
- Nevertheless, my estimate on the least payable dividend for next year is 9 to 10 sen per share. I can go wrong as this is only an estimate through regression of earning and projected earning for 2009.
Thanks for the financial statement for 2008. I have gone through the balance sheet. Reduction of cash reserves is balanced by the increase of non-current asset ( possibly due to the plant in China) and reduction of current liability (payables). So cash reduction is not alarming.
Let me show you again the DECLINE in dividends. The following screen shot was taken for Uchi's latest Q4 quarterly earnings.
See the drastic decline in dividends paid? What if future dividends decline again?
As I believe that you would understand very well that cash balances and earnings all goes hand in hand in how one estimate future dividends.
I look at the decline in dividends paid and I compare it with the cash balances and earnings and I see one clear common factor.
The decline in dividends paid co-incided with the decline in cash balances and the decline in earnings. Which is rather common sense since with less earnings, one can only expect less dividends.
So with the decline in earnings would it flawed to expect a decline in dividends paid?
I would assume this too.
Which is why I would AGREE with you that it's possible that Uchi would only pay about 9 to 10 sen dividend this fiscal year.
Now this sum would be great if one's cost of investment is based on current stock prices.
However, on the other hand, this stock has fallen of a cliff. It used to be above 3.20. Now why I am remembering this 3.20 figure? No it's not plucked from the ball park but this figure is from my memory of folks declaring loudly that Uchi should be purchased as a dividend stock and that many funds are accumulating the stock for the same reason. Well, the out-of-the-world superb dividend yield based at 3.20 is now looking not so good if Uchi pays only 9-10 sen this year! Would these funds be disappointed? (see how these funds got burned chasing the stock for its dividend yield?)
Look at the stock now.
- What puzzling me more is the grey zone of the actual effect of the expansion plan in China where it is skewed negatively by recession. Without recession, would it contribute positively to earning growth or not is yet to be proven.
I do not understand their venture into China at all.
- Even if that can be proven once recession subsides, the current price of Uchi is very attractive for current and future dividend.
Now this issue is too subjective.
I am no paid financial advisor hence I can not offer you any investment advice. All I can do is repeat what things stand for Uchi, based on current stock price, the dividend yield is attractive but with the decline in key issues such as earnings, cash balances and profit margins, this investment will have its risks.
I hope you are aware of this and not insist on purely investing on a stock for its dividends.
Dividends can always be reduced as seen in Uchi and the decline in earnings would strongly mitigate any potential gains derived from the stock's dividends.
One thing that an individual investor don`t do is to call up the company and ask and you get the info ... ehem something privy but important. I did just that, a long distance call from Japan.
ReplyDeleteYou were right. Uchi was dreadful to be bought at RM 3.20. I 120% agree with you.
Earning & dividend were on decline partly due to RM appreciation.
There are multiple factors that affect earning and dividend, some are known and some are unknown. To analyse these do multiple linear regression analysis. If the variable is assumed to be non-linear, at best is neural network but try to avoid over-fitting. But the beauty of these analysis, they gives error measures that indicates the % of the influence by unknown variables.
It may give an answer about future dividend and earning.
In my 2 cents view, I am still contend that Uchi is a good buy at RM 0.84 for me who is satisfied with dividend yield of 10%. Further more, I think, there will be capital appreciation once we are out of the economy doldrum due to increase of earning.
Yo,
ReplyDeletemy 2 cent
1)How trustworthy will be the PR department information esp they dont need to be legally responsible with what they said. If they choose to give unbalance/selective information discharge, then it should raise a big red flag. isnt a honest company is what we should trust for long term?
2)If my memory is still right, one big gov fund bought in uchi at the up-trend. Anyway, this was what was Uchi being held then. High growth with superior dividen.
3)If company can be accurately "predicted" with fancy analysis, then we wont have LTCM and current mess. trying to think KISS
4)Well, it takes seller and buyer to make a trade. The 10% div yield is based on 2 serious uncontrollable variables, price and dividen declared. How can u be sure its price will stay as it is? How can you be 100% sure that the board will make the same payout year in and year out? If more people (big fund or major shareholder) thinks they get better value, why do u think they will stay in?
My last argument: The most important factor is really management integrity (honesty). If i cant trust the management in good time, how could i trust them with my money when the going is getting tough? Survivor of the fittest...
Hi HHC,
ReplyDeleteLet me reply to you point to point basis based on your numbering.
1) Trustworthy is a variable that can only be measured over time. I measure this by comparing official result with unofficial result when the actual result come out circa May 2009.
2)It is the people who made the decision for the big government fund. People tend to be erroneous as their long term vision may be capped by unseen variable. Currently, the price is at the downside. Even I predicted a drop of dividend from 12 sen (14.7%yield) to 10 sen (12% yield) next year. But this is still very attractive considering 1.5year period of investment.
3) Having an analysis is better than having no analysis. Of course having more known variable in analysis is better than having less known variable in the analysis. An analysis may go wrong when unknown variable significantly influence the dependent variable (earning and dividend). In any of these analysis, the words are statistically significant at 95% confidence level and correlation coefficient. Both are significant.
4)Price is uncontrolled because it contain one big unknown variable that is people emotion. People's emotion can be irrational before rational news comes out. That is why certain people bought at high price (ust like the government fund) only to see that the price is too high.And some people sell at low price only to see that they lose when the price moves up. Entry level is important as much as patient.
Dividend is more predictable using the regression analysis and - more known independent variable one has, a better correlation between dividend and the variables can be obtained. Uchi dividend is more predictable because unlike other big conglomerate, its earning are less choppy.
The board currently has a dividend payout ratio of 70%. This is a drop from almost 95% previously seen.It can be changed. Just like other shares, board's decision is very much unpredictable. The most that I can do is to write to the board to give my opinions and ideas on how to increase earning and dividend in the future. Earning, nevertheless can be much better predicted than dividend especially in the case of Uchi.
5. Integrity is very important. That is why point 1) is stated as above. I dont know what integrity issue that you are pointing to.
Do they behaving like a politician who promise something like "star and moon" and yet they dont deliver it or is it the stock broker report which lacks accuracy that you point to?
Both 2 points are different. If the stock broker report lacks accuracy, then one should note the stock broker firm and the person who made the analysis for future accuracy sensitivity.