Techcomp

Swine flu outbreak should lead to more laboratory equipment being used by the government agencies. This smallish company is under-appreciated by the investors. The dividend yield of the Company is 4.5% and the management is already guiding for a better performance in 2009. Look at their cash on hand, already 67% of the market capitalisation. Ex-cash, the Company is trading at dirt cheap valuations. Does anybody have any research report on the Company?

Realised NextInsight has an article on this Company
NEXTINSIGHT WAS at Techcomp\'s AGM held this Monday (Apr 27) at Hotel Re!, where its management answer a wide range of questions raised by shareholders. 

Outlook

Q: How is your JV with Bibby Scientific performing?

It is very successful. Bibby’s UK plant saves a lot on manufacturing costs by using our Shanghai facilities.  Bibby’s products are selling very well in Europe as well as in China.  We also distribute their products in Asia while they distribute Techcomp products in Europe. This JV is an important experience for Techcomp, which we want to replicate with other European parties.

Q: Will Techcomp benefit from the “Swine flu”?
We serve 14-15 sectors and healthcare is one important sector.  Epidemics positively impact demand from the public health sector.

Q: How is the sale of your consumables performing?

The sales of consumables are in line with group revenue growth.  We only sell consumables in China due to export restrictions.
 
Cash Management

Q: Despite having increased its cash balance from US$8.3m at end FY07 to US$17.2m at end FY08, your net cash balance decreased from US$3.2m to US$0.7m.  Why?
The decrease in net cash was mainly due to the cash used in investing activities of about US$2 million. In addition, working capital is needed for the company's business expansion. This, however, is much lower than the increase in our Group revenue.
Q: Why did you take on the loan of US$11.3m in FY08?  Was it necessary?  What is this meant for?
We increased our trade financing loans for purchases made in 4Q08. Such loans were mainly denominated in Japanese Yen, which appreciated some 15% against our reporting currency in US dollars during 4Q.

Given the richness of the Yen through the end of last year, we did not do any early settlement of such loans with our cash in hand.
Q: Note 33 of the Financial Statements says that Techcomp has given corporate guarantees of US$44.6m as security for banking facilities granted to its subsidiaries.  Why does Techcomp need to guarantee such a large amount given that the gross debt of the Company is only US$16.5m?
The corporate guarantee amounts are subject to the amount of banking facilities granted by the bank to the Group's companies instead of the debt level with the Group.

We are using these banking facilities to prepare for further growth in the Group's business volume and to maintain a good relationship with the company's bankers.

These guarantees are provided in respect only to bank facilities granted to Techcomp’s wholly-owned subsidiaries.

Q: This question refers to Note 7 on the age profile of trade receivables.  Given the global need for businesses to better manage their cash flow and increase their cash holdings, how much faster can we collect on our trade debtors (esp. those due for over 1 year)?

Our average credit period ranges from one to 3 months.  However, it is industry practice that 10% of the contract value is classified as retention monies due upon expiry of the warranty period.

We improved our trade receivables profile - even though our accounts receivables increased 9% during 2008, receivables past due for over a year at end of FY2008 were lower. 

Q: Given the current economic and credit crisis, why should we not expect a greater proportion of these trade debts to have to be written off?

We do not foresee any problem on the recoverability of these balances, as our customers are mostly government funded.
M&A

Q: Note 32 of the Financial Statements states that Techcomp entered into a S&P agreement with Richwell on 2 July 2008.  Why then was the announcement only made to the SGXNET 6 weeks later on 19 August 2008?
The S&P agreement signed with the vendors of Richwell on 2 July 2008 was subject to certain conditions.  The SGXNET announcement on the deal was released after these conditions were fulfilled in August 2008.


Corporate Governance

Q: What steps have the independent board taken to prevent corporate scandals?
Our independent directors have visited Techcomp’s factories in China, its Hong Kong headquarters as well as the factory of its acquisition target in Beijing.  We have talked to the staff and auditors, as well as the physical assets.
 

I remember that they have an institutional investor in USA. Kobout Capital or something. Maybe they will average down.

Volume coming out over the past two days. What\'s up with the Company?

if my compass is correct, the gold mine is straight ahead and within striking distance. waiting for the smart prospectors

1H results look promising but have to wait for 2H to see if the good times are really back for Techcomp. stock 30.5 cents today. start of 2009, the stock was 26 cents. no movement! Laggard!