Spindex Industries (SGX:564) – 3Q 2019 Results at a Glance

Spindex Industries (SGX:564), one of the companies that we’ve covered recently, has just reported their financial results for 3Q19. Here’s a summary of their results.

Satisfactory Performance

Spindex reported 2% decline in their turnover from $38.1 million in Q3 FY2018 to $37.4 million in Q3 FY2019. This is due to challenging business conditions in Q3 FY2019 as demand for certain key components weakened during this period. Sales for both automotive systems and machine tools were lower in Q3 FY2019, decreasing by 7% QOQ. However, they experienced higher sales from the IP business sector and the rest of the Group’s businesses categorised under “Others” due to stronger demand for their products and recovery in the Imaging and Printing industry.

Gross profit margin improved from 17% in Q3 FY2018 to 20% in Q3 FY2019. Consequently, net profit attributable to shareholders rose 130% to $1.9 million in Q3 FY2019. Management explained that the huge jump is due to the stabilizing performance of their new projects which incurred additional cost in the Q3 FY2018.

Cash Flow Remains Strong

Spindex generated positive net cash flow of $4.2 million from operating activities, of which $1.4 million was used to finance investment in fixed assets. Accordingly, the Group recorded a net increase in cash and cash equivalents of $3.4 million.

Balance sheet remained solid with negligible borrowings and they maintained a net cash position of $36.2 million as at 31 March 2019.

Conclusion

From the results above, we still do not see that the ongoing trade war has any detrimental effect to their performance. They have reduced their capex investment which is a relief as it has boosted their cash flow. One of our concerns when we covered this company is their increasing capex requirements.

We also see their current acquisition of land in Hanoi, Vietnam and Nantong, China, as a positive as they are gearing up for expansion. Although we do not expect immediate results from this expansion plans, this could provide the company with new business opportunities and economies of scale.

All in all, we expect the management to keep up the good work despite uncertain market conditions. We remain vested in Spindex Industries.

For more info on their valuation and financials, do check out SGX’s website at https://www2.sgx.com/securities/equities/564

Cheers

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