Powermatic Data (SGX:BCY) – Still Picking Up The Cash Flow

Powermatic Data (SGX:BCY) just released their long awaited full year results after a 2-month time extension filed with SGX RegCo.

Since Feb 2020, the Group released updates on their operations in Suzhou. In a nutshell, operations were halted on 3 Feb 2020 due to mandatory closure under the directive of the local government and has resumed operations at normal capacity since 11 March 2020. However, the group is facing component shortage and supply chain disruptions and expects it to have an impact on the current year results.

Income Statement

It is evident that they have performed poorly in 2H20. Sales fell 39% comparatively to 2H19 due to the reasons stated above. To be honest, I am not surprised by the result.

The good news is that they still managed a 4% yoy growth in revenue and 25% increase in net profit. EPS grew from 20.01 cents to 24.99 cents per share.

Balance Sheet

Property Plant and Equipment (PPE) increased by about S$2mil due to their expansion plans for the new plant in Malaysia. Cash and bank balance increased about S$4mil and there is still no debt. One worrying issue is the lower inventory level which the Group has explained that it is due to the supply chain disruption. This could point to a lower forecast of sales for 1H21

Cash Flow Statement

This is where their strength lies. Despite everything with the expansion plans in Malaysia and supply chain disruptions, they still managed to churn out S$8mil in operating cashflow and S$5.7mil in free cash flow. To put it in context, they could double their dividend payout and still have a little change to spare.

I also noticed that they have been drawing down their fixed deposit with >3month maturity. Could it be that they are planning to use it in the near term? (Like for the capital reduction review that they are conducting now)

No Dividend…

Yeah, this caught me off guard but it wasn’t a case of concern. Their balance sheet is very strong and so I do not think that the dividend cut was due to preserving cash during this economic downturn. It is most likely related to the capital reduction review that in ongoing. Guess we have to wait for more news to find out.

Takeway

Powermatic Data has written a lengthy commentary about the current economic situation that they are in and it paints a bleak picture for the coming 1H21 (at least). They was something about a potential lawsuit but from the looks of it, it seems to be a non-issue as they are going to settle this amicably.

Hence, I do not expect a good 1H21 and it is hard to forecast their EPS for the coming year. However, taking into account that;

1) their current cash and property is worth about S$2 per share

2) they have strong cashflow generating capabilities,

I believe that they are still undervalued with my target price at around $3. I am confident that they will tide through this period and be able to ride the 5G/IOT supercycle growth. Next up, I will be looking forward to their annual report to see if the management is able to provide anymore insights.

Cheers.

The Moss Piglet is vested in Powermatic Data(SGX:BCY) at an average price of $1.61.