Aztech   

Aztech: 1H FY06 Net Profit Up 75%

well...they know something much more than us..the retail traders

 

he he he .....you think directors of Aztech is reading SJ? Look at these announcements.

http://info.sgx.com/webcorannc.nsf/ef3ba6cb188613ea482571b2003641d3/bec4c139c0c1b5f3482573f70012ebad?OpenDocument

http://info.sgx.com/webcorannc.nsf/ef3ba6cb188613ea482571b2003641d3/5adec5ec05f4908f482573f7000d3528?OpenDocument

They putting their $$$ where thier mouth is....100 lots.......not alot of $$$ for the well heeled.

 

Hello! Stupidbear, ha! It was back in the army days, not too long ago though, 1.5 years ago? ha!

Agree need to observe more.

Just be careful and filter our those posts that encourages purchases.

It's ur $$ after all =)

 

shplayer,  hahah...I doubt he called himself stupid - it is just a nik and he fancied that the bear is stupid!

I have every reason to doubt that Aztech could perform better in the electronic & comm business due to the existing situations. US's PMI down which means imports are down (Aztech's main market). China is well-known for 'sqeezing' competitors in any products they compete in. Px of raw material are rising. The new business is a 'sore-eyes' - adding salts to wound.....Ouch!!!!! Cheers and all the best to those stiil in the boat!

I'm waiting for 22c b4 going back in for a quicky!

 

bear....why you call yourself stupid? whilst one should not be conceited, we should, likewise, not degrade ourselves.

Anyway, back to the topic of Aztech.

Like I said in my earlier post, the FA looks pretty good but the market is concerned about its margin squeeze (which was very drastic in FY07 - PBT margin was down from 9.06% in FY06 to 6.60% in FY07). In fact, if you analyse 4Q07 result, after stripping away property revaluation, net profit margin was a mere 4.34%. These are pretty severe margin squeeze.....dropping to less than 1/2 in 4Q07 from FY06. If this trend continues, the company can easily fall into the red.

Furthermore, the new building material business is unproven.

Think the market is waiting for 1Q08 result to see if management is able to reverse this margin slide before regaining confidence in the counter.

Share buy backs........is it an attempt to reassure the market of management's confidence? or is management really confident of a turnaround. One thing that seems to be missing recently is director's purchases........cos this will give me more confidence cos they are putting their $$$ where their mouth is.

 

 

Although it shows relatively strong results till date, they are not very convincing.

Div Yield has also been very tempting but can the increased be sustained?

A big contract won of substantial value, but what's the profit margin.

TA wise, it's narrowing. Look for b/o. 0.235 looks like a price with a reasonable margin of safety.

Posted comments on it on my blog,a few days back @ www.bear-analysis.blogspot.com

 

This counter is quite frustrating us.  Even CD can't help to make it more valuable.  We only can wait the result of their new business.  Hope can come out neat and clean.

 

but that's not how the corporate management sees it "There is a saying: If it ain't broken, don't fix it!"

They always go for continuous improvement.  Their profit must be higher and higher each year....we as shareholders also expecting them to do better and better.

 

There is a saying: If it ain't broken, don't fix it!

If you must fix it, it  is always easier to fix the broken piece that you're familiar and the experience in handling it. One too many 'Tigers', I think! Cheers! 

 

Thanks. I think both of you did taught me some stuffs, accelerating my already very slow learning process in valuing businesses. =)

 

 

shplayer is right that Aztech is definitely in bad shape 'cos their sales to the US will be affected by the downturn of the US economy. To make thing worse, they ventured into a new business totally unrelated to what they've been good at! Knowledge of the products is vital in the new business 'cos supplying building materials not according to specifications is costly!!!!!!!!!!

Stupidbear, purchasing of new assets is a Capital Spending and doesn't affect the P&L A/Cs.

Shares buy-back will affect the Balance Sheet of a Company and could change the financial ration like PE in the favor of the Company.

NAV is dependent on the outstanding shares at the time of computing. It is the nett asset divided by the o/s shares. Cheers!

 

ps......

FY07 gain on revaluation of property  is merely an accounting gimmick. There is no monetary transaction so the Co. does not see the $$$$....this gain is reflected in the P&L and Balance Sheet but not in the Cash flow statement. So, I view this gain as intangible.

 

bear,

1. In my analysis, I try to focus on a company's core business. Property sale/purchase is not their core business. If they make a gain, I view it as a bonus. The core business indicates to me the general well being of the company. FY07, Co. capital expenditure was 16.5m of which 8.9m was for an office in Shenzhen. Most of the rest were production equipment.

2. In Share buy back, Co can either cancell the shares or put it into treasury. When they do the latter, it implies they plan to re issue the shares at a later date.......mostly for share options. These shares will not be entitled to dividents until it is reissued. When the Co. cancels its shares, it will reduce the amount of issued shares which will in turn enhance the eps.

NAV is derived from its FY07 results.

 

Thanks for all the reply.

shplayer: You made me think more into the analysis. Thanks for that. However, I do have a few questions, if you could answer,

1. You factored in Sale into your consideration but why not the purchase of the new Asset @ $10m?

2. Shares buy-back put into treasury means? Even so, by buying back, doesn't that reduce the payout on Div, thus increasing the EPS ?

3. How was NAV @ 21.6cents gotten?

If anyone could answer, do so too =)

 

The following is my take on Aztech.

                                                          FY 07               FY 06        Change %

 

Revenue                                           268,310          238,997           +12.3

 

Net Profit                                           18,177            20,038           -9.3

 

Gain on Property Sale/                        3,499               1,030           

Revaluation

 

Net Profit from operations                14,678              19,008         -22.8

 

 

The above figures show that the company is facing a margin squeeze. If we strip out the gains made from property transactions (gains from sale of property in FY06 and gains from property revaluation in FY07), the margin squeeze is more severe than meets the eye.

 

Share buy back is placed in treasury??..9,793k as of 31 Dec 07. Outstanding share option is 11,819,600. So, I don?t expect that the share buy back will help to improve the eps in future.

 

There are 103.8 million outstanding warrants (conversion at 51 ct)?..but at current share price, this will not be a dilutive factor.

 

From FA parameters (based on 26 ct share price):

 

EPS (FY07)                          -  4.45 ct????P/E 5.8X

EPS (less prop transactions) ? 3.59 ct ????P/E 7.2X

NAV                                     - 21.86 ct ???.P/B 1.19X

Yield (FY07)  1.75 ct           -  6.73%

 

Conclusion:

 

The FA parameters look attractive but margin squeeze remains a problem.

 

Caveat emptor

 

 

 

DJ MARKET TALK: DMG Cuts Aztech Systems To Sell From Buy

0110 GMT [Dow Jones] STOCK CALL: DMG & Partners downgrades Aztech Systems (560.SG) to Sell from Buy, target price S$0.265. Says recent FY07 results disappointing, margin prospects unclear; "valuation appears attractive, but the risk profile has, in our view, heightened considerably." Adds recent S$253 million contract win for supply of construction materials boosts order book, revenues, but holds execution risk as new business area and earnings impact hard to quantify as reliant upon volatile construction material prices. Shares down 3.8% at S$0.255 early.(KIG)

 

Milestone
2008
? Aztech Group Secures S$250 Million Contract For the Procurement and Supply of Construction Material
? Aztech Achieves $18.18 Million Net Profit With $268 Million Sales
? Aztech United Pte Ltd diversifies business for construction sector
? Aztech Makes Digital Homes Simpler And Easier With New Networking Products At CES 2008
? New Aztech Draft N Wireless Multimedia Streamer For Digital Living Entertainment
? Aztech Introduces World?s 1st Residential Gateway Combination With Homeplug + VoIP DECT
? Aztech Launches World 1st 200Mbps HomePlug Wireless Draft-N Router

 

Financial Highlights	FY2003	FY2004	FY2005	FY2006	FY2007
Revenue (S$?m)	118.04	152.14	178.58	239.00	268.31
Gross Profit (S$?m)	18.42	25.01	31.72	50.11	46.33
Gross Profit Margin(%)	15.6%	16.4%	17.8%	21.0%	17.3%
Net Profit After Tax(S$?m)	2.83	6.43	10.13	20.04	18.18
Net margin(%)	2.4%	4.2%	5.7%	8.4%	6.8%
Basic EPS(SGD cents)	0.71	1.61	2.53	4.94	4.45
Dividend (SGD cents)	0	0.25	0.50	1.50	1.75

 

I have a vested interest in this stock. I have followed the stock since 1997 and seen it recovered in the early days. 1 cent to be paid out on 2^nd May. A 3.6% returns for 3 months is not bad. I am going to accumulate 1000 lots at around 0.25 to 0.28 for the next 1 month. The company is accumulating the shares at 0.26 to 0.265 up to a total of 10.5 million shares as of 15^th Feb.

 

Full Year Financial Highlights
FY07(S$'m)
Turnover 268.31
Gross Profit 46.33
Gross Profit Margin 17.3%
Net Profit After Tax $18.18m
Net Margin (%) 6.8%
EBITDA 31.29
Basic EPS (cents) 4.45
Dividend (cents per share) 1.75cts
Interim 0.75cts
Final 1cts (to be paid out on 2nd May ~ 3.6% returns for 3 months based on the share price of $0.26)

Good value for money and decent return for 3 months of investment.

12th Feb SGX announcement
Aztech Systems Ltd ("Aztech") wishes to announce that its wholly owned subsidiary, AZ United Pte. Ltd. has secured a contract for the supply of construction material.
The Contract, which is projected to be executed in three stages is worth a total of approximately S$250 million for the overall procurement and supply of the material over a period of three (3) years. The first stage is valued at S$23 million, to be executed over a
period of six (6) months. The first delivery is expected to commence by the end of March 2008. The subsequent two stages of the Contract valued at S$92 million and S$138 million respectively are to be executed upon confirmation from the buyer should the
preceding stages progress satisfactorily. The Group expects the abovementioned project to have a positive impact on its revenue
and earnings per share for the financial year ending 31 December 2008 and 2009.

Year to Date orders (as of 4th Feb) $109.09 million + $23 million

Summary
Healthy Business Model

• Well spread product offering

• Wide spread customer base

• 
  
  Diversification into new business sectors

Shareholder Value

• Healthy net cash position

• Good track record of dividend payment

• 
  
  Enhance shareholder value with share buy-back practices,amounting to a total of 9.79 million shares worth S$3.65 million in 2007 alone. Total Accumulated shares buy back on 15th Feb 2008 is 10.218 million shares.

Growth

• 4 continuous years of increase in turnover

• 20 consecutive quarters of profitability

• 
  
  Broadband and home networking industry is vibrant and continues to grow

Diversification

• Venturing into the supply of construction materials with order book of $23 million

• 
  
  New products range in the remote control model planes