On 28 August 2023, Tai Sin Electric Limited (“TSE”) have announced their full year result ending 30 June 2023. They have shown that they are still in a strong financial position, and although their earnings per share have decreased, it is still able to sustain their dividend payout.
Management have continued to actively manage their risks, with derivative financial instruments recorded on their financial position for forward foreign exchange and copper contracts. This will help to smoothen out the earnings over the next few years, and provide assurance to investors that there will not be major fluctuations to their financial position.
Website: Financial Statements And Related Announcement::Full Yearly Results
Photo source: https://www.taisin.com.sg/about-us/
Background
TSE is a Singapore-based investment holding company. The Company is engaged a cable and wire manufacturer and dealer in such products. Listed on the Stock Exchange of Singapore Catalist (formerly known as SESDAQ) in 1998, the Group was subsequently transferred to the SGX Main Board in 2005. Its operating segments include Cable & Wire (“C&W”), Electrical Material Distribution (“EMD”), Switchboard (“SB”), Test & Inspection (“T&I”).
TSE’s Cable business builds its success on the aggressive development and marketing of a comprehensive range of high quality cables through a distribution network serving a diverse range of industries, while maintaining strong partnerships with reputed consultants and main contractors. Working together, they provide competitive electrical cabling and wiring solutions for both the private and public sectors in all categories of industrial, commercial, residential and offshore & marine projects.
To cater for the robust growth in the regional market, TSE operates three cable manufacturing plants. They are located in Singapore, Malaysia and Vietnam, all of which are fully equipped with the latest manufacturing facilities and technologies to meet increasing demands.
TSE is strongly committed to making continual advancements in technology and innovation, both of which are their greatest strengths. Their ISO 9001, ISO 14001 and OHSAS 18001 certifications and conformity to various world-class standards are solid testimonies in their efforts to achieve excellent quality in both their manufacturing process and products.
Financial highlights
Revenue
| Metrics | Current | Previous |
|---|---|---|
| Revenue | +11.3% | +31.3% |
The revenue increased by 11.3% to SGD421.7 million compared to SGD379.0 million in the prior financial year. The increase in revenue is a Favorable aspect of a dividend stock.
Although there was an increase for the full year, it is worth nothing that for the second half of FY2023, revenue saw a decline of 5.93%. This decline was predominantly driven by the Electrical Material Distribution (“EMD”) Segment, which experienced a decrease of SGD9.2 million, or 16.24%, from SGD56.8 million to SGD47.6 million, due to a significant reduction in the Electronic (“ELN”) Cluster, a result of the global electronics downturn. This is something for investors to keep in mind as we enter a new financial year,
Earnings per share
| Metrics | Current | Previous |
|---|---|---|
| Earnings per share | -24.3% | +40.0% |
Profit decreased by 24.3% to SGD16.8 million for FY2023 compared to SGD22.2 million in the previous financial year. Similarly, earnings per share decreased by 24.3% to SGD0.0362 per share from SGD0.0478 in the prior financial year.
The decrease was mainly due to a lower gross profit, as attributed mainly to higher reversal of provision for onerous contracts in FY2022 and higher deliveries of loss-making projects during FY2023. This is Unfavorable in view of the continued rising costs in the macro environment.
Operating Cash Flows
| Metrics | Current | Previous |
|---|---|---|
| Operating Cash Flows | +343.1% | +17.3% |
Operating cash flows have increased by 343.1%, where it was in an overall net cash used in operating activities of SGD7.4 million for FY2022 and is now generating operating cash flows of SGD18 million.
The reason for the significant increase was due to collection of trade receivables, where there was inflow of SGD16.4 million in FY2023 as compared to an outflow of SGD24.7 million in the prior year. In my opinion, this metric is Favorable.
Price-to-book ratio
| Metrics | Current | Previous |
|---|---|---|
| Price to Book Ratio | 0.90 | 0.92 |
Based on the closing share price of SGD0.400 as at 5 September 2023, and the Net Asset Value (“NAV”) of the Group as at 30 June 2023 of SGD0.445 per share, this translates to a Price-to-book (“P/B”) ratio of 0.90. This is Favorable as it translates to paying a discount for TSE business.
Debt-to-equity ratio
| Metrics | Current | Previous |
|---|---|---|
| Debt-to-equity ratio | 40.7% | 59.5% |
I have adjusted for their provision for onerous obligations as at the end of each financial year as it is a management estimate and not directly related to financing the company. For 30 June 2023, the provision amounted to SGD7.8 million. The adjusted liabilities and equities will be SGD87.4 million and SGD214.6 million respectively.
| Financial | SGD’000 | Adjusted SGD’000 |
|---|---|---|
| Total Liabilities | 95,316 | 87,430 |
| Total Equity | 206,755 | 214,641 |
Debt-to-equity ratio for 30 June 2023 have decreased to 40.7%. The decrease in debt is primarily because of repayments of bank borrowings, which was drawdown and existing as at 31 December 2022 by the C&W Segment for purchase of copper. This metric is Neutral as although TSE is not as reliant on external sources to fund operations as before, the debt-to-equity ratio is still a notable amount.
Interest coverage
| Metrics | Current | Previous |
|---|---|---|
| Interest coverage | 10.9x | 14.4x |
The interest coverage stands at 10.9 times as at 30 June 2023, using profit before tax of SGD21.4 million and finance costs of SGD2.1 million. The metric is Favorable. TSE currently generates profits to ensure sufficient interest coverage and is higher than my required coverage of 5.0 times. With the significant repayment of borrowings, TSE is less likely to be reliant on debt and will have less interest to service.
Dividend yield
| Year | Yield | Total |
|---|---|---|
| 2023 | 5.88% | SGD 0.024 |
| 2022 | 5.88% | SGD 0.024 |
| 2021 | 5.63% | SGD 0.023 |
| 2020 | 3.75% | SGD 0.015 |
| 2019 | 5.63% | SGD 0.023 |
| 2018 | 5.63% | SGD 0.023 |
With the payout remains of SGD0.0235 for the calendar year 2023 and closing share price of SGD0.400 as at 5 September 2023, this translates to a yield of 5.88%. For my benchmark, a general reasonable range would be around an average of 5.5% to 6.5% in the current environment. TSE’s dividend yield is within my benchmark.
Website: Reasonable Dividend Yield 2023Q3
With the exception of 2020 due to Covid-19, TSE have been distributing relatively constant dividends throughout the years. For a Company that is involved in the manufacturing business, this is a Favorable dividend yield, comparable with Real Estate Investment Trusts (“REITs”) whose mandates are to distribute majority of their earnings as dividends.
Summary
| Metrics | Financials | Rating |
|---|---|---|
| Revenue | +11.3% | Favorable |
| Earnings per share | -24.3% | Unfavorable |
| Operating Cash Flows | +343.1% | Favorable |
| Price to Book Ratio | 0.90 | Favorable |
| Debt-to-equity ratio | 40.7% | Neutral |
| Interest coverage | 10.9x | Favorable |
| Overall | | Favorable |
For FY2023, in general the metrics have improved and TSE is a company with strong fundamentals to sustain the dividend payouts. Especially as they have managed to reduce their borrowings significantly this half of the year, showing they are able to manage their capital efficiently. TSE has proven itself to be a reliable defensive stock in today’s volatile market and the stock is a good option for those considering to add for its long term sustainable dividend payout.
However, as inflation and supply chain disruptions is expected to continue for extended periods of time, investors do need to keep an eye out for any possible new information relating to their operations. There continues to be an increase in their overall cost of operations which resulted in their decrease in earnings per share. Investors should keep an eye out for any developments relating to cost pressures.
Disclaimer: Not financial advice. All data and information provided on this site is for informational purposes only.
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Website: Tai Sin Electric Limited (SGX: 500): 2023 Half Year Result
