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Showing posts with label Uchitec. Show all posts
Showing posts with label Uchitec. Show all posts

Investing In A Stock For Its Dividend Yields II

Wednesday, March 3, 2010

I guess some people refuse to read or they cannot or they read only what they want to read or they lack the intelligence to understand simple English.

  • SS said...
    You duk main tepi-tepi lubang everyday, so PER cannot use, Div Yield also cannot pakai, so how

In the posting Investing In A Stock For Its Dividend Yields

In my exact words again.

  • Of course, these are 2 examples where investing a stock for its dividends failed. My point? Simple. I am not saying such an investing would not work and I am pretty sure many could provide me with full data where investing a stock for its dividends are proven successful. However, all I am saying is the investor should be careful. There are many incidents where such an investing can fail! The sustainability of the company's earnings is just as important. The reasoning is simple, without sustained earnings for the company, how could the company afford to continue paying so much dividends?

Perhaps I need to put in bold yet again: "I am not saying such an investing would not work and I am pretty sure many could provide me with full data where investing a stock for its dividends are proven successful. "

Perhaps some are mind less open and they simply refuse to want to see.

LOL!

So rather pathetic, yes?

Anyway, let's not waste time on such small ones.

In that blog posting, I made 2 assumptions. Yeah, ass-u-me is ass-u-me is assume. Let paste it here again "Firstly, a buyer for Uchi its dividends in 2007 will be in between Jan to April 2007. Lowest traded price of Uchi then was 2.98. I would use simply use 2.98 as a reference point. With a past dividend yield of 20 sen, at 2.98 one would be looking at a yield of 6.7%. The second assumption is a purchase price 2.40 based on the lowest price for 2007. That would be a yield of 8.3%."

Two reference points were used. 2.98 and 2.40. Both of them, yielded extremely poor results if an investor purchased Uchi solely for its dividends.

The end result is there for all to see. Investing in a stock for its dividend yields can fail and I have provided a clear example with actual facts.

And again, I am not saying investing for dividends will NOT work. It's just this strategy is NOT a 100% sure win thingy.

But many could also provide me with examples where it will work!

And we do not have to look for. We also can use Uchi as the very sample where dividends do pay!

No joke!

Let me show an example where investing for a company's dividends can work!

For its IPO, Uchi was sold to public at a price of rm 4.80. So let's assume INVESTOR DY has the hindsight to buys 10,000 shares of UCHI after its IPO was listed at 5.50. ( Do allow me to use a higher number at 5.50 and not the IPO price of 4.80)

Cost of investment 55,000. Number of shares 10,000

ps: do verify each data with link provided. Uchi's dividends are tax exempts

Dividends collected: 300 x 10 = 3000.00

Number of shares after bonus: 10,000 x 11/10 = 11,000

Dividends collected: 120 x 11 = 1320. Total dividends collected = 4320.00. Number of shares = 11,000. Cost of investment = 55,000. Yield = 7.8%.

Number of shares after bonus now = 11,000 x 7/5 = 15,400.

Dividends collected: 15.4 x 250 = 3850.

Total dividends collected = 3850 + 4320 = 8170.00

Dividends collected: 15.4 x 203.2 = 3129.38.

Total dividends collected = 8170 + 3129.38 = 11,299.38.

Cost of investment = 55,000. Current yield = 11299.38/55000 = 20.5%!!

Dividends collected = 15.4 x 220 = 3388.

Total dividends collected = 3388 + 11,299.38 = 14687.38

Number of shares held now = 15.4 x 11/10 = 16,940

Dividends collected = 16.94 x 273.2 = 4628.

Total dividends collected = 4628 + 14687.38 = 19315.38

Number of shares now held = 16,940 x 5 = 84,700

Dividends collected = 84.7 x 64.4 = 5454.68.

Total dividends collected = 5454.68 + 19315.38 = 24770.06.

Dividends collected = 84.7 x 118.80 = 10,062.36.

Total dividends collected = 10,062.36 + 24770.06 = 34832.42

Dividends collected = 84.7 x 118.80 = 10,062.36.

Total dividends collected = 10,062.36 + 34832.42 = 44894.78.

Dividends collected = 84.7 x 94.40 = 7995.68.

Total dividends collected = 7995.68 + 44898.78 = 52890.46.

Dividends collected = 84.7 x 97.20 = 8232.84.

Total dividends collected = 8232.84 + 52890.46 = 61123.30.

* Cough * It's only 2006 and the total dividends received is already more than the investment outlay of 55000!

Dividends collected = 84.7 x 97.20 = 8232.84.

Total dividends collected = 8232.84 + 61123.30 = 69356.14.

Dividends collected = 84.7 x 164.60 = 13941.62.

Total dividends collected = 13941.62 + 69356.14 = 83297.76

Another bumper year!

Total dividends collected = 84.7 x 100 = 8470.

Total dividends collected = 8470 + 83297.76 = 91767.76

Total dividends collected = 84.7 x 100 = 8470.

Total dividends collected = 8470 + 91767.76 = 100237.76.

Total dividends collected = 84.7 x 60 = 5082.

Total dividends collected = 5082 + 100237.76 = 105319.76.

Total dividends collected = 84.70 x 90 = 7623.

Total dividends collected = 7623 + 105319.76 = 112942.76.

How? Yes, you need to verify my data and my counting, for I could always make a mistake.

Now if numbers are correct, what do we have?

One had made an investment outlay of buying 10,000 shares in Uchi back in 2001 at a cost price of 5.50. Cost of investment = 55000. Total dividends since then is a whopping 112,942.76!

And from the bonus and splits since buying in 2001, the investor would now hold 84,700 shares. Uchi last traded at 1.26 yesterday. Meaning these shares are now worth 106722.00. Meaning the shares are sitting on a paper profit of 56722.00!

How?

Well, if one had bought in 2001 at a price of 5.50, how could I say that investing in a stock for its dividends would not work????

Confused?

This very same stock, in the posting Investing In A Stock For Its Dividend Yields, yielded a terrible investing result.

How?

My point?

Well... let me repeat again... "However, all I am saying is the investor should be careful. There are many incidents where such an investing can fail! "

And in this stock, Uchi, I have showed that dividend investing yielded two very contrasting end results!

So next time, someone whispers to you, that Ah Bang Bang Company, is a super stock, and if one had invested in the stock since listing, one would be super duper rich and because it had such a wonderful track record, one should invest in it NOW for its dividends too.

Yeah, it could work. There's always a possibility it could work but do bear in mind, it could always fail too.

Just like Uchi, it could also fail. Despite its track record, investing in Uchi in 2007 for its dividends yielded a poor result unlike investing in 2001.

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Posted by kresek at 4:19 PM , 0 comments
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Are You Impressed With Uchi's Earnings Recovery?

Sunday, February 28, 2010

Blogged the following posting the other day: Investing In A Stock For Its Dividend Yields

Uchi Tec announced its earnings the other day. There was some improvement. It made some 10.3 million. (previously it made some 9.187 million only). For sure, one can say that there is great improvement if one looks at its recent quarterly earnings result. Here's a snapshot of Uchi's earnings provided by KLSE Tracker.


Reading left to right, one can see Uchi's earnings improving from 2.771 mil to 4.665 million to 9.187 million to 10.3 million.

And if one based their reasonings on just these set of numbers, surely one would have proudly proclaim that the numbers are very impressive. Some would even call it as growth.

So what's wrong with such numbers?

Almost a year ago, on 25 Feb 2009, I wrote this Yet Another Update On Uchi.

  • We are no longer talking about slowing growth but now we are talking about DECLINING earnings!

Uchi used to be a fantastic growth stock.


Look at that awesome track record. From making 23 million in its fy 2000, Uchi managed to earn a whopping 83.888 million in fy 2006. And with a net margin of 54%, it was truly awesome and the stock flew up, up and away.

People bought the stock because it was a growth stock.

But as most would and should realise that it's highly unlikely such a growth could last forever.

Fy 2007, Uchi made 78.228 million,
FY 2008, Uchi made 58.748 million.

And the following chart highlighted in the posting, Yet Another Update On Uchi, showed the great decline.


And the earnings made recently showed Uchi made only 26.953 million for its fy 2009.

So despite the strength seen in its quarterly earnings, the overall decline in Uchi's earnings is a concern, yes? Here's a compiled table.


How?

The very first table clearly showed promise in Uchi's last 4 quarterly earnings but as impressive as they were, the numbers simply paled in comparison. Besides declining profits, net margin and sales revenue have been declining drastically too!

Of course, the optimistic might bet on this stock because they like what they have seen in Uchi's recent earnings. They believe and argue that the worst is over for Uchi.

Some are still cautious and skeptical. These numbers simply pales in comparison to what Uchi had done before and they are skeptical and doubt if the current recovery is sustainable.

Some believe the worst is over for Uchi but on the other hand, they reckon the recovery growth could very soon taper out.

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Posted by kresek at 3:46 PM , 0 comments
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Investing In A Stock For Its Dividend Yields

Sunday, February 21, 2010

Mr said...

  • Dear Mr Moolah,

    Sorry, but I don't know how to reach you and so, I am doing this here.

    Would like to seek your expert opinion on High Dividend Yield stocks to invest in Bursa.

    I am a 43 year old family man with a very busy full time job, and no time nor interest to monitor the stock market. A long time ago, a very successful and elderly friend of mine urged me to invest in a basket of High Dividend Yield stocks, and just collect its dividends over the years. Sadly, he passed on recently.

    I am now at the stage where I am struggling what to do with my funds. Savings accounts only pay 0.5% p.a. Fixed Deposits only pay 2% or 2.5% for 12 months. This is very, very small. How to survive on this?

    What do you think of PBBANK? A friend of mine swears by it. Can you recommend a few high dividend yield stocks for me to consider? And what prices would be a good price to enter? I plan to start with RM50k, and invest in 5 stocks with RM10k each. I can only monitor the stock market maybe once or twice a month. I do not know about trading, and plan to invest in these stocks for a very long time. My goal is to collect the dividends, hopefully, it will grow with time to beat inflation and fixed deposits. Things keep getting more expensive by each year due to inflation.

    I have also asked Mr Dali about this. So, please feel free to publish my query. I may check in again in a couple of weeks time.

    Would sincerely appreciate your thoughts. I know the final responsibility to invest is mine and mine alone.

    Thanks and kind regards,
    Mr Teoh

Mr. Teoh,

Do realise that I am not an investment advisor. Hence, whatever you read on this blog, do take it with some massive pinches of salt. Simple reasoning is that I could always be wrong.

However, this morning, I am willing to share some opinions or two on the issue of high dividend yield stock.

A dividend yield is a simple. It's basically the dividend paid divided by price of the stock you paid.

But strangely I find that many do not explain the risk involved in such an investment. This is not a risk free investment. The fact the dividend paid is never constant. As much as the dividends go increase, there is always a possibility that it could always shrink! And not forgetting the fact that any given stock can go up or DOWN at any given day. Meaning to say, there's no divine right stating that high dividend yield stocks cannot go down! It could go down as much as it can go up!

Let me use an REAL example on this stock called Uchi Tech. Why? Cos I had blogged on it couple of times before. So data to the stock is easily referred to.

Take 2007.

So what was UCHI's dividend history?

In 2006, it paid the following:

If my data collection and counting is not wrong, that's 20 sen paid in dividends.

So this company pays good dividends. And how was the company? Was it making good money? Last year, on 26th Feb 2009, I wrote Would You Buy Uchi For Its Dividends? The company's earnings track record is tabled here

Now in 2007, the stock was trading between 3.42 and a low of 2.40.

Uchi usually announces its dividend payment dates for its yearly first batch of dividends in April.

Now I will make 2 assumptions. Firstly, a buyer for Uchi its dividends in 2007 will be in between Jan to April 2007. Lowest traded price of Uchi then was 2.98. I would use simply use 2.98 as a reference point. With a past dividend yield of 20 sen, at 2.98 one would be looking at a yield of 6.7%. The second assumption is a purchase price 2.40 based on the lowest price for 2007. That would be a yield of 8.3%.

In 2007, as per another posting , Reply To Would You Buy Uchi For Its Dividends? Uchi paid the following.

Note: the buyer at 2.40 (lowest price was recorded in Nov 2007) would have missed the first 3 dividends.

21 sen total. More than what it paid in 2006!

In 2008, Uchi paid the following.

Only 16 sen paid in 2008!!!!!

The dividends shrank!

In 2009, Uchi paid the following.

The dividends shrank again!!!!

Let's add up for the dividends paid since 2007 for the buyers for a dividend yield at 2.98. Total dividends received since 2007 is 46 sen. Price of Uchi now is only 1.29!!! Which means this dividend yield investor is now sitting on a net current loss of 1.23 (2.98 - (0.46+1.29)) or an investment loss of 41.2%!!!

And for the buyer at 2.40. Total dividends received are 35 sen. Which means a current invest loss of 0.76 sen (2.40 - (0.35+1.29)) or an investment loss of 31.6%!!!

How?

See how investing for dividends can fail?

Is this a one off example?

How about this stock called ?

In 2007, I made the following posting, Review on Yi-Lai. Yi-Lai then on 11th Sept 2007 was 1.20. Yi-Lai today is 0.74!!

Of course, these are 2 examples where investing a stock for its dividends failed. My point? Simple. I am not saying such an investing would not work and I am pretty sure many could provide me with full data where investing a stock for its dividends are proven successful. However, all I am saying is the investor should be careful. There are many incidents where such an investing can fail! The sustainability of the company's earnings is just as important. The reasoning is simple, without sustained earnings for the company, how could the company afford to continue paying so much dividends?

Hope these second opinion helps and do note that I could always be wrong.

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Posted by kresek at 5:09 PM , 0 comments
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A Quick Review Of Uchi's Earnings

Wednesday, November 25, 2009

Time to give out credit. :D

First Uchi Tec.

The last posting I made on Uchi Tec was in Aug 2009: A Quick Look At Uchi's Earnings.

Uchi announced its earnings last night.


As can be seen from the table above, as again, the broader picture still does not look good for the earning still pales in comparison with what Uchi did last fiscal year.

However, when you compared it what Uchi did last quarter, the sign of the turnaround is there. (you can see the second quarter screen shot here and the first quarter screen shot here )

Some notes from the company:

  • 14. PERFORMANCE REVIEW

    Revenue in Ringgit Malaysia for the period ended September 30, 2009 (RM62.862 million which equivalent to USD17.753 million), decreased by 35% as compared to September 30, 2008 (RM97.078 million which equivalent to USD29.829 million), mainly due to lower sales volume in consequence of customer’s logistic planning restructuring and unfavourable global economic condition.

    15. COMPARISON WITH THE IMMEDIATE PRECEDING QUARTER’S RESULTS

    There was no significant change in operating profit as compared to the immediate preceding quarter ended June 30, 2009.

    Profit before taxation for the current quarter increased by 89% because profit before taxation for the six months period ended June 30, 2009 was affected by the recognition of realized foreign exchange losses of RM8.9million upon termination of certain open contract with a bank.

    The recognition of such exchange losses shall not recur in the subsequent period of the year.

One more note. The dividend issue. Back in Feb 2009, I wrote Would You Buy Uchi For Its Dividends? (Uchi then was 75 sen)

The last few lines of the posting:

  • 3. Cash balances is also clearly declining and one of the main reason is that Uchi's pays great dividends.

    Now common sense would suggest that if the earnings keep on declining,     one day Uchi's dividends payout would surely decline too.

    Counter argument is that in the long run, Uchi's earnings should recover and given the fact that Uchi's current cash balances is still quite sizeable, why worry? Buy and enjoy the dividends for the long term.

    How?

    Would you buy Uchi for its dividends?



Have a look at this screen shot from Uchi's earnings notes.




And as usual... how?

Oh.. this again is not a tipsy. Please lah. The only way I know how to make anyone tipsy is to whip out my bottle of whisky or perhaps a bottle of wine. :)

So if you like to ass-u-me, go ahead, your ass not mine. :D

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Posted by kresek at 4:01 PM , 0 comments
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A Quick Look At Uchi's Earnings.

Tuesday, August 25, 2009

I last wrote on Uchi's earnings in May 2009: A Quick Look At Uchi's Latest Earnings




On the broader picture, things not looking good eh?

However, on the q-q basis, let me give credit. There are some improvement. ( comparison table is here )

----------------------

update: the local press just loves to highlight the 'improvement'. :)

Uchi Tech 2Q earnings improve from previous quarter

  • Uchi Tech 2Q earnings improve from previous quarter
    Written by Jenny Ng
    Tuesday, 25 August 2009 20:55

    KUALA LUMPUR: Penang-based UCHI TECHNOLOGIES BHD saw earnings and sales pick up in the second quarter ended June 30, 2009, from the preceding quarter although compared to last year, the group still experienced a contraction.

    Compared to the previous corresponding quarter, revenue and net profit declined by 33.4% and 71.6% to RM22.4 million and RM4.7 million, respectively, in the second quarter. Meanwhile, profit before tax contracted 71.2% to RM4.9 million.

    However, on a sequential basis, the group's revenue and net profit increased 23.3% and 68.4% from respectively, RM18.1 million and RM2.7 million in the first quarter ended March 31, 2009.

    For the six-month period, revenue fell 42.4% to RM40.5 million from RM70.4 million a year ago while net profit shrank 78.7% to RM7.4 million from RM35 million.

    In notes to the financial statement, the group said it recognised realised foreign exchange losses amounting to RM8.9 million for the two quarters. It added that the recognition of such exchange losses shall not recur in the rest of this year.

    According to the group, lower sales volume is expected for the current financial year in line with the global economic slowdown, leading to lower financial results too. No dividends were declared.



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Posted by kresek at 6:18 AM , 0 comments
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A Quick Look At Uchi's Latest Earnings

Friday, May 15, 2009

Last posted Friday, May 08, 2009, Uchi: Am I Losing My Bashing Touch?

Uchi announced its earnings tonight.

I thought I would do a simple comparison.

Blogged on Wednesday, February 25, 2009, I made the following quick comments. Yet Another Update On Uchi. I will use the table posted in the posting as a comparison.




The issues mentioned previously.

1. Product relevancy is an issue.
2. Plunging sales is an issue.
3. Plunging profits is an issue.
4. Plunging cash is a big issue.
5. Plunging dividends is also an issue.

Here is the snapshot of Uchi's earnings tonight.


Some real quick comments.

1. Sales revenue - indeed plunging.

Reason? I wonder if the product relevancy has anything to do with it?

2. Earnings plunged.

Q-Q it plunged from 11.042 million to just 2.771 million. Y-Y it plunged even worse because last fiscal year, same period Uchi made some 18.572 million!

3. Cash. It's depleting yet again.

Cash now stands at 115.3 million. Last quarter, cash was some 135.8 million.

And when cash and earnings are depleting rapidly, would the final dividend shrink again?

How now my dearest Brown Cow?

--------------------------------------------------

ps. regarding the stock price. LOL! I have no idea how Uchi will trade. If it goes up, you owe me nothing. Same if it goes down too. You owe me nothing.

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Posted by kresek at 5:19 AM , 0 comments
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Uchi: Am I Losing My Bashing Touch?

Thursday, May 7, 2009

I received this set of comments which I thought I would like to highlight.

Hmm.. 'hentam'? Bashing is it? :)

Let's look back in history.

I started writing about Uchi back in February 2006.

  1. Monday, February 27, 2006 ROI on Uchi
  2. Monday, February 27, 2006 ROI on Uchi: Part II
  3. Tuesday, February 28, 2006 ROI on Uchi: Part III - the ESOS issue
  4. Thursday, May 04, 2006 My Earnings has been Shrunk!

Those series of postings were based on ROI or as I define it as a review of investment. The assumption made that if I owned shares in Uchi, and since Uchi had been a one gem of an investment, what would I do? Would I hold it forever and ever in spite of the insane ESOS issue, which could ultimately shrink the company's earnings per share.

How? Did I 'hentam' Uchi or was I highlighting the danger in the potential earnings dilution caused by the ESOS?

Highlighting a concern equates to bashing?

On Feb 27th 2006, Uchi closed at 3.28. KLCI then was 928.

More than one year later, I wrote the following postings.

  1. Saturday, September 22, 2007 Review Of Uchi Again
  2. Monday, September 24, 2007 Uchi and its ESOS

That 24th September posting was interesting.

  • SS said...
    If you know Uchi close enuf, you will know there is not many "VIP employees" inside Uchi that really need motivation to work. The main activities is coming from Uchi Optoelectrinics (M) Sdn. Bhd. This is a very small scale organization we are talking about here, don't tell me Ted Kao & Edward Kao need those ESOS for motivation, if you don't know who is Ted & Edward ? Better avoid this counter.

Hmm.. looks like SS made a bigger 'hentam'. LOL!

Anyway on 24th Sept 2007, Uchi last traded at 2.98. (on the 22nd Sep 2007, blog posting, Uchi was trading around 3.02.) while the KLCI was trading at 1317!!!

One can see the underperformance of Uchi versus KLCI from 27 Feb 2006 to 24 Sep 2007 in the chart below. Chart provided by yahoo finance.

Ok what happen next is more important.

The Malaysian market was in one grand of a bull run, which peaked around mid Jan 2008.

Let's see how Uchi performed from 27nd Feb 2006 to 31st Jan 2008.


And if my data is not flawed, to be even more accurate Uchi last traded at 2.07 on 31st Jan 2008.

As can see from the day I started highlighting the issue with the ESOS in Uchi back in Feb 2007, Uchi had tumbled from 3.00+ to 2.00. And this happened during a time when there was a massive bull run in the KLCI.

So how?

Now do I feel the urge to gloat on this issue? No. Frankly I do not see the reason why I should.

On Wednesday, February 25, 2009, I started reviewing on Uchi again. Yet Another Update On Uchi It was a brief review. I highlighted the decline in earnings or rather the spectacular earnings growth for Uchi had clearly ended. ( Chart of Uchi then: pix )

Uchi was trading as low as 75 sen!

The next day, I wrote Would You Buy Uchi For Its Dividends?

It was a simple yet extremely interesting investing situation. As said clearly in that posting,

  • Based on yesterday's closing price, this proposed Tax Exempt Dividend is certainly interesting.
But the concerns were clearly undeniable. Sales and profits were now declining instead of growing! Cash were depleting too.

And since it was an interesting 'investing' scenario, it attracted a lot of feedback.

  1. Wednesday, March 04, 2009 Reply To Would You Buy Uchi For Its Dividends?
  2. Thursday, March 05, 2009 Reply To Radzian On Uchi Once More
  3. Friday, March 06, 2009 More Feedback On Uchi
  4. Monday, March 09, 2009 Last Words On Uchi For Now

In that posting, under the comments, I made the following last remarks. Why? Because it was getting rather tedious and the points made were the very same old points. Anyway, I wrote the following comments in that last posting.

  • Radzian,

    Oh yes ,I am aware that your assumptions and estimates were based on GDP and exchange rate and this is exactly why we differ.

    Let me ask you, have you considered the issue of Uchi's main product and its relevancy under current market environment? Me? I have huge concerns.

    Quote: Not many people are honest and generous to share what they earn in their business, so I stick to those who are generous albeit they are falling due to appreciation of exchange rate and recession.

    Yes, that's true BUT I will NOT force myself to invest based on this reason alone!

    Have you really, really consider the fact that the dividends are plunging each year?

    And this looks like the 3 year in a row that Uchi's dividend has fallen. What if the dividend falls again next year?

    And if you would really want my opinion, my answer is that ...

    I will not invest in Uchi now for its dividends! I call it a PASS. And the reasons are so clear.

    1. Product relevancy is an issue.
    2. Plunging sales is an issue.
    3. Plunging profits is an issue.
    4. Plunging cash is a big issue.
    5. Plunging dividends is also an issue.

    And when you add in the fact that the owners had shown their utter greed in the shambolic ESOS, I am afraid that I would rather avoid this stock.

    Yes, integrity is the biggest issue! Make that point 6.

    That's my frank opinion.

    And if Uchi goes up, it goes up.

    It's not a problem at all for me.

    Missing this opportunity in Uchi would not cause me to lose sleep because I know very well that simply isn't an investment for me.

    And yes, it's never a crime to sit out and I would rather sit out than to risk my money just for the sake of the dividends.

    The concerns is simply too huge to ignore    .

And if one bought as Radzian as suggested at 84 sen, one would be laughing all the way to the bank since Uchi is now at 1.39. ( Can see some comments here )

Actually, I find it so rather strange. Is talking about the pro and cons of a stock called bashing? Can't folks discuss on a stock? :D

And as usual, I also wonder, why no one wanted to thank me for highlighting the issue in the first place when I blogged Would You Buy Uchi For Its Dividends?. Uchi was trading between 0.775 and 82 sen on that day. :D LOL! Nah. I would never do that.

Do I feel silly for not buying? LOL! Nope. Would I lose sleep over it? Nope.

Why should I?

Is it a crime not to miss an opportunity? It it?

Say you are poker player and you always win playing poker. However, you do not like black jack cause you can't win in it. One day, you step into your casino. You see the players winning and shouting their ass off on the black jack tables. And you decide to forgo the opportunity to win on the black jack tables. Well is it a crime to miss this opportunity?

Anyway, since Feb, most markets had rallied. Most stocks have rallied too. Some even much better despite the weakness in their fundamentals. Is this not a fact? :D

So how?

When I started blogging on Uchi, it was 3.00+. It fell to as low as 0.75. All this because of my 'bashing'? LOL!

Now Uchi has climbed back up to around 1.39. Am I losing my 'bashing' touch?

LOL!

So amusing.

When one discuss about an issue, and when one is on the other side of the opinion, I guess one is a basher eh?

LOL!

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Posted by kresek at 4:44 PM , 0 comments
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Last Words On Uchi For Now

Sunday, March 8, 2009

Interesting dialogue between Mohd Radzian and hhc1977 on the posting More Feedback On Uchi"

Let me say a few words again.

The main concerns for Uchi

1. Decline in earnings.
2. Decline in net profit margins.
3. Decline in cash balances.
4. Continued decline in dividends paid.
5. The integrity of the owners in rewarding themselved more in a much bloated ESOS

As it is, Uchi's potential yield in dividends based at a price of 84, does have its justifications, despite its lower dividends.. if

1. Uchi's dividends for total year is at least 9-10 sen.
2. The recession does not last longer than 8 months (would this time be ok, Radzian?)

Well the investment would pay off if the 2 points hold true.

Could it not go wrong?

The recession. This is synchronized global recession and there are some very strong arguments that it could last much longer.

And in the face of such a scenario, I have raised the issue again and again on Uchi's main products and look at its relevancy on the face of a global recession. What is the impact?

And without a shadow of a doubt, Uchi's products would hurt if the recession is prolonged and it's without a shadow of a doubt too that Uchi's earnings would be impacted.

Of course, some would be correct to point out that since Uchi's product is sold in USD and since the RM is much weaker against the USD, this should act as a buffer to Uchi's earnings.

However, some would also quickly point out the drastic slump in sales revenue. With the huge slump in sales, how good could profits be?

And if the decline in earnings continue, so would the share price.

And this is where the huge concern is. The dividends received could be good based at 84 sen but any potential gain could easily be reversed by the falling share price caused by declining earnings.

That's the concern.

Of course, a concern is just a concern. It might not happen and if it doesn't happen, the investor taking the bold investing decision to buy would be rewarded.

However, if the concern holds true, the prudent investor had just made the intelligent move by not being seduced by the dividend yields on the backdrop of a slumping earnings.

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Posted by kresek at 8:22 PM , 0 comments
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More Feedback On Uchi

Thursday, March 5, 2009

The comments were getting far too crowded. Sorry but this is how blogspot is.

"Reply To Radzian On Uchi Once More" attracted more comments.

Mohd Radzian said...

  • One thing that an individual investor don`t do is to call up the company and ask and you get the info ... ehem something privy but important. I did just that, a long distance call from Japan.

    You were right. Uchi was dreadful to be bought at RM 3.20. I 120% agree with you.

    Earning & dividend were on decline partly due to RM appreciation.

    There are multiple factors that affect earning and dividend, some are known and some are unknown. To analyse these do multiple linear regression analysis. If the variable is assumed to be non-linear, at best is neural network but try to avoid over-fitting. But the beauty of these analysis, they gives error measures that indicates the % of the influence by unknown variables.

    It may give an answer about future dividend and earning.

    In my 2 cents view, I am still contend that Uchi is a good buy at RM 0.84 for me who is satisfied with dividend yield of 10%. Further more, I think, there will be capital appreciation once we are out of the economy doldrum due to increase of earning.

hhc1977 said...

  • Yo,

    my 2 cent

    1)How trustworthy will be the PR department information esp they dont need to be legally responsible with what they said. If they choose to give unbalance/selective information discharge, then it should raise a big red flag. isnt a honest company is what we should trust for long term?

    2)If my memory is still right, one big gov fund bought in uchi at the up-trend. Anyway, this was what was Uchi being held then. High growth with superior dividen.

    3)If company can be accurately "predicted" with fancy analysis, then we wont have LTCM and current mess. trying to think KISS

    4)Well, it takes seller and buyer to make a trade. The 10% div yield is based on 2 serious uncontrollable variables, price and dividen declared. How can u be sure its price will stay as it is? How can you be 100% sure that the board will make the same payout year in and year out? If more people (big fund or major shareholder) thinks they get better value, why do u think they will stay in?

    My last argument: The most important factor is really management integrity (honesty). If i cant trust the management in good time, how could i trust them with my money when the going is getting tough? Survivor of the fittest...

Mohd Radzian said...

  • Let me reply to you point to point basis based on your numbering.

    1) Trustworthy is a variable that can only be measured over time. I measure this by comparing official result with unofficial result when the actual result come out circa May 2009.

    2)It is the people who made the decision for the big government fund. People tend to be erroneous as their long term vision may be capped by unseen variable. Currently, the price is at the downside. Even I predicted a drop of dividend from 12 sen (14.7%yield) to 10 sen (12% yield) next year. But this is still very attractive considering 1.5year period of investment.

    3) Having an analysis is better than having no analysis. Of course having more known variable in analysis is better than having less known variable in the analysis. An analysis may go wrong when unknown variable significantly influence the dependent variable (earning and dividend). In any of these analysis, the words are statistically significant at 95% confidence level and correlation coefficient. Both are significant.

    4)Price is uncontrolled because it contain one big unknown variable that is people emotion. People's emotion can be irrational before rational news comes out. That is why certain people bought at high price (ust like the government fund) only to see that the price is too high.And some people sell at low price only to see that they lose when the price moves up. Entry level is important as much as patient.

    Dividend is more predictable using the regression analysis and - more known independent variable one has, a better correlation between dividend and the variables can be obtained. Uchi dividend is more predictable because unlike other big conglomerate, its earning are less choppy.

    The board currently has a dividend payout ratio of 70%. This is a drop from almost 95% previously seen.It can be changed. Just like other shares, board's decision is very much unpredictable. The most that I can do is to write to the board to give my opinions and ideas on how to increase earning and dividend in the future. Earning, nevertheless can be much better predicted than dividend especially in the case of Uchi.

    5. Integrity is very important. That is why point 1) is stated as above. I dont know what integrity issue that you are pointing to.

    Do they behaving like a politician who promise something like "star and moon" and yet they dont deliver it or is it the stock broker report which lacks accuracy that you point to?

    Both 2 points are different. If the stock broker report lacks accuracy, then one should note the stock broker firm and the person who made the analysis for future accuracy sensitivity.

Some comments for Radzian.

Ok let me butt in for here and offer some second opinions too.

Price. Yes, we all understand and we all know very well what price stands for. And as rightly pointed out by you.

  • Price is uncontrolled because it contain one big unknown variable that is people emotion. People's emotion can be irrational before rational news comes out.

However, let's not forget on one massive point here, which is you are focusing on how great the dividend yield is for Uchi based on the price of 84 sen.

And what't the key words?

The amount of the dividend and the price paid for the investment.

Fact for Uchi.

Dividend paid for Uchi is declining. Sales is declining.

And the justification is there to expect to declining dividends for this year and next year too.

Price paid is so, so important.

Yes, we can all use the axiom that price is never controllable and due to the beast in the market, prices goes up and down in unpredictable manners. Sometimes the price move is rational and sometimes it isn't.

Take the 3.20 price mentioned earlier.

These were the prices exactly 2 years ago. The exact same argument. And most of all in early 2007, subprime was a word not heard by many. It was a non issue.

So what was one looking at back in Jan 2007 or better still, what would be an even more excellent comparison is that we used the 'after Uchi announced its Q4 earnings in Feb 2007' as a comparison. 27th Feb 2007 would be the date.

The table in posting Review Of Uchi Again would be valid - we just ignore the ttm (trailing twelve month) numbers.

Here is the quarterly link: Quarterly rpt on consolidated results for the financial period ended 31/12/2006

And the price to be used for reference would be the traded price on 1st March 2007, a day after the quarterly earnings and Uchi traded between 3.12 and 3.16.

So Uchi made 83.888 million for fy 2006. Q-Q growth is there and most important the earnings growth was as impressive as in the last years. Uchi's earnings grew from 73.578 million to 83.888 million. Earnings growth was there. Check.

Net profit margins was at an incredible and insane 54.7%. Check.

Dividend paid in year 2006 was impressive (Uchi paid some 71.478 million) (check) (however there is a warning sign here because Uchi actually paid more in year 2005! (87.311 million) (maybe a ? here!) , the cash balances still increased by another 10 million. Check.

However the price for an investment in Uchi was only around 3.14 (I used the mid traded price for Uchi on 1st March 2007).

ps: you can check the consistency in these comments and compared it versus blog postings ROI on Uchi and ROI on Uchi: Part II. Those two blog postings were actually made on the very same day Uchi made this Q4 announcement! And the next day I also wrote ROI on Uchi: Part III - the ESOS issue)

And in the company's quarterly announcement wordfile, the company mentioned the following.

  • As of the date of this announcement, the Board of Directors proposed a final dividend of 6 Sen per share of RM0.20 each, exempt from income tax, a special final dividend I of 2 Sen per share of RM0.20 each, less income tax and a special final dividend II of 9 Sen per share of RM0.20 each, exempt from income tax for the year ended December 31, 2006.

If my calculation is not wrong, that should be around 17 sen to be given out as dividend. (Uchi's current one is only 6 sen!)

And with Uchi 'usually' paying another 10 sen in dividend at end of each year, the prospective investor in Uchi was looking at a possible 27 sen in dividend.

And it's certainly an attractive proposition of 8.6% yield based on the price of 3.14. (of course it would pale in comparison if your suggested estimated dividend (which I agree that it's a reasonable estimate) of around 9 sen holds true.

However, leaving out the present day factor, the reason to invest in Uchi at 3.14 for its dividends was just as solid. Uchi had earnings growth, great margins, solid cash flows + solid dividends.

And incredibly, some of my investing friends, exited the stock at around this time.

Why.

The ESOS issue was part of the integrity issue that many did not like. Some voted with their feet. Some voted against the increment of the ESOS (it was an ESOS of a mindblowing 15% over an existing ESOS which ultimately increases the share base by a mind blowing 22%, which ultimately dilute shareholders earnings by the same amount) but was disappointed that the ESOS was pushed throigh. So they too voted with their feet.

And what was so wrong with the ESOS again.

And as you would know, the company is run by the Kao brothers. Ted Kao and Ed Kao.

What was also questioned was the fact that the Kao brothers were granted a huge chunk of the ESOS. Around 12% each if not mistaken or 24% of the whole ESOS pie.

Now obviously the knowledgeable minority shareholders saw that this is not correct.

They questioned the INTEGRITY of the company.

They questioned why the excess.

They questioned if the ESOS (which clearly did not benefit the minorities) was pushed through by the board management because the two Kao brothers would be the main beneficiary.

And this was the clear INTEGRITY issue regarding Uchi.

Oh yes, a clear simple reason to defend what Uchi had done, would be to say that this is a common practice.

Yes, it's a common practice but if the minority shareholders do not understand that they are getting the short end of the stick, ultimately the minority will be screwed.

And so despite the sexy dangling dividend offered now by Uchi, perhaps you would understand why folks like hhc might not be interested at all.

I once posted, Management Integrity,

  • According to Fisher, the management of a company is always for closer to its assets than its shareholders. And without even breaking any laws, there are number of ways that the management can benefit themselves and their families at the expense of the minority shareholders, for example employing their relatives, buy-and-selling of properties between relatives at above market rates or the issuing common stock options.
ps: As mentioned the other day.
  • I would look at Uchi's main products and look at its relevancy on the face of a global recession. Yes I would use recession instead of slowdown.
Have you consider the relevancy of Uchi's product in the face of a prolonged global recession?

Yes, I have no doubt that one day the current global recession will pass us by.

No doubt at all.

However, between now and then, many things could happen.

For example, a prolonged recession could really, really hurt Uchi's earnings. And when it does, the dividend received now, might not be enough to compensate the loss in the stock price.

And needless to say, yes I understand the stock price would one day rise again.

But that would defeat the purpose of rushing and buying the stock now for the dividend.

And of course, I could be just as wrong IF the recession end soon.

Hope this helps as a second opinion as usual.

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Posted by kresek at 3:50 PM , 0 comments
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Reply To Radzian On Uchi Once More

Wednesday, March 4, 2009

Got the following comments on "Reply To Would You Buy Uchi For Its Dividends?"
Mohd Radzian said...

  • I have gone through the forum thread on ESOS and it was rightly diagnosed for 2007.

    However, in 2009, due to ESOS exercise price, it will not contribute much to weakness to EPS.

That is correct. Uchi's stock price has plummeted which means that it's quite unlikey to see any ESOS being exercised.

Point for consideration was that minority shareholders did not like the huge percentage of ESOS was granted. Yes, currently we all know that there has been no exercise of ESOS due to the unfavourable exercise prices. And to aggravate the case, some shareholders had posted on Sahamas on their displeasure with how the two Kao brothers had the majority of the ESOS pie. This is something that real long term investors do not like to see.

  • Current threat (2009) is global slowdown. As at end of February (2 months of 1st.Quarter), the estimated revenue is 6 million USD.
    The question is , what would it be for the rest of 10 months.

Firstly I do not wish to talk revenue. I am sorry. Revenue is simply less important than net earnings. This is my flawed method.

Now regarding the figures, I have no idea where you get your data from. Here is the link (it's not a permanent link due to Bursa's webspace management) Quarterly rpt on consolidated results for the financial period ended 31/12/2008. Uchi's reported earnings was for 2008 Q4.

What matters for me is unaudited net profit for fy 2008 is at 58.748 million. Previous year it did 78.228 million.

On a q-q basis? Q3 Uchi made 12.736 million. Q4 it made 11.042 million.

I do not know about you but what it is clearly stated is that Uchi's earnings declined on a q-q basis and also on a y-y basis. (If you insist on revenue, revenue too declined)

So what can I want to expect for fy 2009?

I do not know. I would look at Uchi's main products and look at its relevancy on the face of a global recession. Yes I would use recession instead of slowdown.

  • Nevertheless, my estimate on the least payable dividend for next year is 9 to 10 sen per share. I can go wrong as this is only an estimate through regression of earning and projected earning for 2009.

    Thanks for the financial statement for 2008. I have gone through the balance sheet. Reduction of cash reserves is balanced by the increase of non-current asset ( possibly due to the plant in China) and reduction of current liability (payables). So cash reduction is not alarming.

Let me show you again the DECLINE in dividends. The following screen shot was taken for Uchi's latest Q4 quarterly earnings.

See the drastic decline in dividends paid? What if future dividends decline again?

As I believe that you would understand very well that cash balances and earnings all goes hand in hand in how one estimate future dividends.

I look at the decline in dividends paid and I compare it with the cash balances and earnings and I see one clear common factor.

The decline in dividends paid co-incided with the decline in cash balances and the decline in earnings. Which is rather common sense since with less earnings, one can only expect less dividends.

So with the decline in earnings would it flawed to expect a decline in dividends paid?

I would assume this too.

Which is why I would AGREE with you that it's possible that Uchi would only pay about 9 to 10 sen dividend this fiscal year.

Now this sum would be great if one's cost of investment is based on current stock prices.

However, on the other hand, this stock has fallen of a cliff. It used to be above 3.20. Now why I am remembering this 3.20 figure? No it's not plucked from the ball park but this figure is from my memory of folks declaring loudly that Uchi should be purchased as a dividend stock and that many funds are accumulating the stock for the same reason. Well, the out-of-the-world superb dividend yield based at 3.20 is now looking not so good if Uchi pays only 9-10 sen this year! Would these funds be disappointed? (see how these funds got burned chasing the stock for its dividend yield?)

Look at the stock now.

  • What puzzling me more is the grey zone of the actual effect of the expansion plan in China where it is skewed negatively by recession. Without recession, would it contribute positively to earning growth or not is yet to be proven.

I do not understand their venture into China at all.

  • Even if that can be proven once recession subsides, the current price of Uchi is very attractive for current and future dividend.

Now this issue is too subjective.

I am no paid financial advisor hence I can not offer you any investment advice. All I can do is repeat what things stand for Uchi, based on current stock price, the dividend yield is attractive but with the decline in key issues such as earnings, cash balances and profit margins, this investment will have its risks.

I hope you are aware of this and not insist on purely investing on a stock for its dividends.

Dividends can always be reduced as seen in Uchi and the decline in earnings would strongly mitigate any potential gains derived from the stock's dividends.

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Posted by kresek at 4:06 PM , 0 comments
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Reply To Would You Buy Uchi For Its Dividends?

Tuesday, March 3, 2009

Posted the other day. Would You Buy Uchi For Its Dividends?

I had some comments from Mohd Radzian who gave me his two cents. :D

  • Uchi's dividend has been on a decline for the past few years.

    However, considering the price of Uchi presently, the dividend is very attractive. The dividend given and proposed this year (2009)based on last year's earning is generous at 12% yield for those who bought Uchi at cost of RM1.00 per share.

    For next year (2010) I roughly estimate a dividend of 9 sen, carrying a yield more than 10% on current share price.

    Current decline of earning is due to the global recession.

    Assuming that this year's is the worst year for economy. Then next year onwards, we should see an increase of earnings for Uchi. This should translate to higher dividend yield for year 2011 if the price is stagnant at RM 0.81.

    A few points that need to be observed:-

    a) Will the recession prolonged ?
    b) Dividend payout policy continuation.
    c) Entry price.
    d) Untowards financial and operation in Uchi.

    If above observance is non-obstructive, then Uchi with it's dividend yield offer more value than other stock especially in the recession years.

I replied.

Mohd Radzian replied again

  • Thanks for your compilation of Uchi's backgound especially the ESOS.

    It is a concern if there is an abuse and I appreciate your comment regarding the ESOS and glad to see that no new ESOS is given in 2008 and hopefully too in 2009.

    My thots after reading your posts on Uchi.

    There are three ways for a company to generate fund for expansion. (1) Internally generated fund (cash reserve), (2) Sale of equity and (3) Debt.

    All the three methods reduce EPS..(1) through loss of interest on earning, (2) dilution of earning through enlarge share base and (3) Interest due to bank.

    The pecking order is always (1),(2) and (3). I wonder what has transpire within the board of the company when (2) is chosen as the method to raise capital.

    If agency theory is pursued by the board, it will make those who got the ESOS more responsible in charting the future direction of the company as no director wanted to buy equity at high price only to see it falls below the purchase price which is now the reality.

    But no shareholder will agree if the directors are issued ESOS only for them to make quick bucks. To clear this issue, it is good to have a look at the change in director's shareholding throughout the issuance of ESOS.

Radzian,

I am replying you in a new post as I want to leave some clickable links for you.

If I am not mistaken, there were no new ESOS program in 2008 and I do not think there will be any in 2009 either. Simply because the previous ESOS has yet to be fully exercised.

Regarding directors ESOS. You can see Uchi's last reported annual report here: Annual Report 2007 (see page 38 for director interest - and compare versus comments posted on posting #12 http://sahamas.net/forum61/5459-2.html .

Let me share some thoughts about Uchi's dividends.

If you have the time, perhaps you might want to compile your own table on Uchi's historical dividends.

Let me do a simple one.

In the year 2007 (I use year and not fiscal year for easy, quick reference), Uchi paid the following dividends. (I have always stated from day one that Uchi is a good growth stock and a good dividend stock ... **)

In the year 2008

That's all that was paid. Do compare the total paid.

Now let's look at some issue.

1. Now earlier, I just said that Uchi is a good growth stock. Now this has changed. The growth did not slow down but DECLINED.

2. Its cash balances is declining rapidly.

3. The dividends paid out is less, when one compares 2008 to 2007.

4. Net profit margin based on unaudited fy 2008 earnings is an impressive 47.8%. However it pales in comparison to what Uchi has done since fy 2004.

And yes, based on current price, one does have the justification to invest in the stock for its dividends.

Should one invest in it despite the 4 issues mentioned?

Well I cannot answer this for you because I am not a financial advisor. All I can do is lay out these facts and hope these facts can help you as a second opinion.

Rgds

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Posted by kresek at 4:42 PM , 0 comments
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