19 February 2014

PSL Holdings - Disappointing Financial Year 2013

PSL Holdings reported a disappointing performance on financial year ended 31 December 2013, with net profit slid 34.7% to S$2.9M as compared to S$4.5M a year ago. The revenue dropped 60% to S$14M from S$35M previous year. From the breakdown of the net profit, the profit from continued operation only attributed to S$1.2M.

Balance Sheets
The company remains in healthy state, with cash & equivalents S$43M which is increased by S$14M compared to previous year. As total liabilities is S$5M, so total net cash after deducted all liabilities is S$38M. If included 7M receivables from the disposal of subsidiaries, the total net cash would be S$45M or around 11.6 cents.

Management Comments
The management is now focus on trading of hardware and repair of machinery parts and earth moving works and excavation services after disposal of PSLE and RRPL. As of now, the company remains committed to exploring coal and minerals mining opportunities. The management is proposing 0.5 cents first and final dividend which translated to 1.8% dividend yield based on 26.5 cents closing price today.

Analysis
If based on the current shares price, the whole enterprise value is estimated at around 15 cents after deducting net cash of 11.6 cents. Adjusted ROE ( Equity Minus the Cash Items including other receivables) is at impressive at the 36% level. Cash flow wise, the payables was reduced by around S$8M, notwithstanding the free cash flow remains in positive figure as the company have disposed off its subsidiaries.

As the company is committed to exploring coal and mineral mining opportunities, I believe the cash flow in future would be much volatile compared to these 2 years and probably the management would not be able to distribute more cash to shareholders as the CAPEX in coal and minerals mining activities is considered huge.

It is rather hard in estimating the intrinsic value in coal mining companies, as there are quite a few factors affecting the output & input price.  If based on net S$45M and 13X of 1.2M, the intrinsic value would be around 15.65 cents, about 60% of current shares price. So let's see if there is any business progress in this company later, and it may justify the current share price.

1 comment:

  1. This is a nice detail and I like your post because it is delivering the good figures that so many organizations do not want to share publicly. If you have the financial advisers it is good for the company to know about their strength a weakness as financial advisers always have the keen interests in the balance sheet and always have the best ideas how to get the maximum benefits of the investments made.
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