Serial System spin-off seen as positive

Serial System spin-off seen as positive

By: 
Stanislaus Jude Chan
22/05/18, 03:30 pm

SINGAPORE (May 22): NRA Capital has an “overweight” call on Serial System with a fair value estimate of 24 cents ahead of the proposed spin-off of the group’s Hong Kong and China electronic components distribution business to list on the Hong Kong Stock Exchange (HKSE).

The fair value implies an upside of nearly 45% from Serial System’s current trading price of 16.6 cents.

See: Serial System plans spinoff of Serial Microelectronics (HK) on Hong Kong bourse

“Serial will collect back US$20.8 million ($27.9 million) of shareholder loans made to the spin-off company, to establish financial independence between the parent and spin-off company,” says analyst Liu Jinshu in a report on Tuesday. “The funds will allow Serial to expand the rest of its businesses while maintaining its high dividend pay-out of 50% per year.”

According to Liu, Serial System’s remaining electronic components distribution business make more than US$5 million a year, even though the spin-off company generates more than 90% of Serial’s earnings.

However, he notes that Serial will continue to maintain a majority stake in the spin-off company.

“The spin-off will not lead to a carve-out of Serial’s key profit drivers,” says Liu. “Serial will likely deliver robust growth in 2018.”

“We expect FY18 PATMI to grow by 46% to US$13.92 million and FY19 PATMI to grow by 6% to US$14.76 million. The group reported PATMI of US$5.2 million in 1Q18. Hence, Serial has already achieved 37% of our forecast in 1Q18,” he adds.

In addition, the group’s total revenue grew 22% to US$405.2 million, crossing the US$400 million mark for the first time in any quarter since the company’s inception.

See: Serial System's 1Q earnings almost double to $6.9 mil

The analyst says Serial System could consider setting aside part of the recovered capital for the payment of future dividends, as this would better align shareholders’ interests in relation to the spin-off.

“Serial currently trades at an attractive valuation of 9.22x trailing 12-month P/E and 0.77x P/BV and offers an attractive yield of 6.3% based on a dividend per share of 1.04 Singapore cents per share for 2018,” says Liu.

On track

In 2016, the government took back control of the train network and invested heavily in improving services. But has the system really been fixed?   SINGAPORE (May 20): Annabelle Lee does not particularly enjoy her daily commute to and from work. “I get so tired by the time I get to work because of how stuffy the train is,” says the 28-year-old civil servant who spends an hour getting to her office in the city centre from her home in Sengkang. “The trains are always so crowded and everyone is packed like sardines in the carriages.”  Even so, she concedes that the tra....
Read More >>
Moving from compliance to accountability

While the collection, use and disclosure of data is regulated by the Personal Data Protection Act, b

Malaysia's transport minister Loke has made significant changes a year on, but more difficult tasks lie ahead

(May 20): Malaysia’s Transport Minister -Anthony Loke Siew Fook offers us a firm handshake as he gets off the escalator at the swanky hotel in downtown Kuala Lumpur where we are meeting him for an interview. He looks unassuming, serious, quiet even, for want of a better word, and moves with a purposeful stride. Clad in slacks and a plain shirt, he is accompanied by just two young aides. No suit and tie, entourage or bodyguards. There is a passion about Loke, 42, when he speaks of the transport sector. After just a year at the helm of the Transport Ministry, Loke, who holds a degree ....
Read More >>