ADAMPAK

In  calendar year 2011, Adampak paid out 2+1 cents in dividends. If the company pays out the same 2 cent final dividend (with upcoming FY results)  and an interim 1 cent this year, that would translate into 10.7% yield if you buy the stock at current price of 28 cents.

Will company be able to maintain 2-ct final dividend? That is what I am wondering, considering the impact of Thai floods.

In addition, its net profit for third quarter ended Sept 30, 2011 fell by 28.2 per cent to US$1.64 million from a year ago.

My take on Adampak is it's a dividend yield stock -- so I wouldn't be expecting much capital gain, if at all, in the near term, esp when the 4Q result is going to be poor becos of the Thai floods. Having said that, I take my hat off to the management for announcing/deciding to give up their current plant in Thailand (which was hit by the floods). Restore it and then hand back to the landlord -- and move to another location which is not flood-prone. (The restoration work will be completely covered by insurance) I wonder what is going thru the heads of other companies now -- will they leave en masse the flood prone area or be sitting ducks for the next flood season?

Yes, it's a yield play, possibly more interesting and rewarding than REITs currently because of the upswing in HDD sector. Waiting for opportunity to buy at 28 cents

Not going to touch 28 cents anytime soon as it is on uptrend!!!
Hitting 30.5 cents now on higher-than-usual liquidity

Boutique fund buying? otherwise hard to explain why Adampak is now 33 cents. Buyer(s) confident of restoration of 3-cent dividend in FY12? Optimism abounds!

Lim & Tan Securities had a comment on Adampak today (see below). It's a sensible one as valuations are looking not cheap anymore. However, my hunch is different -- there is upside beyond 40 cents. The steady accumulation in the last few days has to have a strong reason albeit a mid- to longer-term reason (which I am not aware of). Anyway, just my 2 cents worth.



 Adampak’s share price has broken above its recent high of 31 cents currently at 33.5 cents and looks likely to retest its 1H 2011 highs of 36 cents.
 The recent strong performance could likely be attributable to (a) anticipation of the restoration of
its 3 cents a share dividend this year, up from last year’s reduction to 2 cents a share; (b) anticipation of a strong rebound in earnings this year on the back of the recovery in their core hard disk drive business as their customers and themselves restore their operations back to pre-flood levels as well as insurance claims;

and (c) potential market share expansion as their key customers Seagate and Western Digital
consolidates their acquisitions of Samsung and HGST’s hard disk drive operations in 2H 2012.
 
 We had upgraded our recommendation to a BUY on 6 Mar ’12 after our meeting with management on the back of the above cited reasons. The stock price was 29 cents then.
 Assuming the stock retests 1H 2011 highs of 36 cents (2.5 cents above its current price), Adampak would be valued at $94.9mln and assuming this year’s earnings recover to pre-flood levels of $12mln, its forward PE would be about 8x and assuming the company restores the dividend to 3 cents a share this year, yield would be 8.3%.
 At these valuation levels, it would be about in line with its historical average valuations and we will likely turn “Neutral” on the stock unless there are fresh reasons for us to believe that it can trade above its historical average valuation. As of now, we do not see any potential fresh reasons, especially as the sector peers are trading slightly below their historical average valuations.