On 7 February 2024, Tai Sin Electric Limited (“TSE”) have announced their half year result for FY2024. There was a slight weakening of their fundamentals with the decrease in revenue and earnings. Notably as well there was an increase in borrowings which management have indicated were used to purchase copper. This might be something investors should take note of, especially as their trade receivable balance continue to increase, which might translate to cashflow issues. Investors will need to take note and assess if this is a substantial risk.
Website: Financial Statements And Related Announcement::Half 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 | -14.8% | +11.3% |
Revenue decreased by 14.8% to SGD195.8 million compared to SGD229.6 million in the same period for the previous financial year. This metric is Unfavorable. The decrease was mainly due to completion of projects as well as being affected by the semiconductor cyclical downturn.
Earnings per share
| Metrics | Current | Previous |
|---|---|---|
| Earnings per share | -42.1% | -24.3% |
With the other expenses remaining relatively unchanged, the decrease in revenue caused profit to decrease by 41.63% to SGD9.4 million from SGD14.9 million in the previous financial year. Similarly, earnings per share decreased by 42.1% to SGD0.0150 per share from SGD0.0259 per share. This is Unfavorable as well.
Operating Cash Flows
| Metrics | Current | Previous |
|---|---|---|
| Operating Cash Flows | +56.4% | +343.1% |
Operating cash flows have increased by 56.4%. Take note for both half of the years, operating cashflows are negative. The increase for this financial year is due to the decrease was smaller when compared to the previous financial year. The reason for the significant increase was due to an increase in trade receivables. While this metric is Favorable due to improvements, investors should keep an eye out for any potential allowance for trade receivables.
Debt-to-equity ratio
| Metrics | Current | Previous |
|---|---|---|
| Debt-to-equity ratio | 45.4% | 40.7% |
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 31 December 2023, the provision amounted to SGD4.2 million. The adjusted liabilities and equities will be SGD94.9 million and SGD208.9 million respectively.
| Financial | SGD’000 | Adjusted SGD’000 |
|---|---|---|
| Total Liabilities | 99,128 | 94,944 |
| Total Equity | 204,755 | 208,939 |
Debt-to-equity ratio for 31 December 2023 have increased to 45.4%. The increase in debt is primarily because of increase in bank borrowings, which management states that it is used by the C&W Segment for purchase of copper. There may be cashflow issues, as there appears to be a need to finance their operations using borrowings due to the slower collection of receivables. This metric is Unfavorable.
Interest coverage
| Metrics | Current | Previous |
|---|---|---|
| Interest coverage | 9.7x | 10.9x |
The interest coverage stands at 9.7 times as at 31 December 2023, using profit before tax of SGD9.4 million and finance costs of SGD1.1 million. The metric is Favorable. TSE currently generates profits to ensure sufficient interest coverage and is higher than my required coverage of 3.0 times. Take note that TSE may become more reliant on debt should there be any cashflow issues and this metric will decrease.
Price-to-book ratio
| Metrics | Current | Previous |
|---|---|---|
| Price to Book Ratio | 0.90 | 0.90 |
Based on the closing share price of SGD0.395 as at 1 March 2024, and the Net Asset Value (“NAV”) of the Group as at 31 December 2023 of SGD0.441 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.
Dividend yield
| Year | Yield | Total |
|---|---|---|
| 2024 | 1.90% | SGD 0.008 |
| 2023 | 5.95% | SGD 0.024 |
| 2022 | 5.95% | SGD 0.024 |
| 2021 | 5.95% | SGD 0.023 |
| 2020 | 3.80% | SGD 0.015 |
| 2019 | 5.95% | SGD 0.023 |
With the payout in March 2024 of SGD0.0075 per share, the dividend for 2024 remains in track to be similar to previous years at SGD0.0235 per share. With a closing share price of SGD0.395 as at 1 March 2024, this translates to a yield of 5.95%. For my benchmark, a general reasonable range would be around an average of 5.25% to 6.25% in the current environment. TSE’s dividend yield is within my benchmark.
Website: Reasonable Dividend Yield 2024Q1
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 | -14.8% | Unfavorable |
| Earnings per share | -42.1% | Unfavorable |
| Operating Cash Flows | +56.4% | Favorable |
| Debt-to-equity ratio | 45.4% | Unfavorable |
| Interest coverage | 9.7x | Favorable |
| Price to Book Ratio | 0.90 | Favorable |
| Overall | | Neutral |
Overall, the metric states that it is currently neutral to invest in TSE. TSE is still a company with strong fundamentals to sustain the dividend payouts over the next few years. However, investors will definitely need to take into consideration that their recovery may not be immediate as the semi-conductor industry is cyclical and may still be in the phase of recovering. Should this be extended, it may become unfavorable.
Nonetheless, 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 adding for its long term sustainable dividend payout.
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 Full Year Result
