CFA Institute Singapore
SINGAPORE (Mar 6): Shares in Powermatic Data Systems are up 14 cents or 10.1% at $1.53 as at 11.23am with 52,800 shares changing hands.
This comes after CIMB started coverage of Powermatic with an "add" and a target price of $2.58 or 12.8 times FY19 earnings, based on sum-of-parts valuation.
In a Monday report, analyst William Tng says Powermatic, whose core business is wireless connectivity, is plugged into the growth potential of 5G telco networks and the rising Internet of Things (IoT) trend.
CIMB says Powermatic released more than 10 cutting-edge products in FY17. The high value-add and intellectual property content of its business led to a 45.1% gross margin for its wireless connectivity segment.
Powermatic also has a "rock-solid" balance sheet, says Tng. The company was in a net cash position as at end Sep 2017 with zero debt. Its investment property is also unencumbered.
"At current share price, we think investors are getting Powermatic’s growing wireless connectivity business for free," adds Tng.
Based on Powermatic’s balance sheet at end Sep 2017, if the company was to be liquidated, Tng estimates the per share value of its assets less total liabilities would be $1.41.
And although Powermatic does not have a formal dividend policy, the group paid out a final DPS of 5 cents in the past five years.
In FY17, Powermatic rewarded shareholders with an additional special DPS of 2 cents as the company’s net profit hit $4.2 million, the highest since the Global Financial Crisis.
However, Powermatic suffers from poor trading liquidity and Tng says the board should deliberate the possible liquidity benefits of a share split or bonus issue.
Succession planning is also urgent as Dr Chen, its founder and CEO, is approaching 70 years of age with no family-in-waiting to take over the business. Chen and executive director Ang together own 63.9% of Powermatic as of Mar 1.