| CDW HOLDINGS: A 97% drop in attributable profit for Q4 due to tax adjustments impacted its P&L. CDW's full-year attributable profit came in at US$403,000, 95% lower than in 2015 at US$7.2 million. EPS is at 0.17 cent USD vs 2015 at 3.3 cent USD. NAV per share is 36.6 cent SGD. Working capital is still strong at US$51 million, of which US$45 million represent cash and bank balance. At current share price, its PE is way above 120 times, but its price-to-book ratio is 0.8 times. Its businesses, mainly in the LCD backlight units, are declining, affected by loss of market share and technological obsolescence. The company is embarking on a new F&B business but results don't seem good. Dividend has been cut, 0.7 cents USD in total vs previous year at 1.2 cents USD. There is no reason why its share price got chased up yesterday, but probably because of its strong cash balance and low price-to-book ratio. The LCD parts segment will continue to face challenges and stiff competition in 2017, and the company is trying to soften the impact via non-related businesses.  Prior to his retirement, Chan Kit Whye (left) worked more than 30 years as Regional Finance Director, Financial Controller and Manager in a multinational specialty chemical business. He has played an active role in CPA (Australia) Singapore Branch, taking up positions in its Continuing Professional Development and Social Committees. Kit Whye is a Fellow of CPA Australia, CA of Institute of Singapore Chartered Accountants and CA of the Malaysian Institute of Accountants. He holds a BBus(Transport) Degree from RMIT, MAcc Degree from Charles Sturt University and MBA from Durham Business School. |
Li Min says: Would like to add my 2 cents worth on CDW
1. CDW is trading at close to net cash.
Net cash stands at USD 39,012 (SGD 55,007). Market cap stands at (SGD 60,380). Market cap supported by 91% of net cash.
2. Lower profits mainly attributable to tax expense. Stripping off tax expense, PBT improved 133% QoQ
- not much clarity given as to why the tax expense was significantly higher. But tax expense shouldn't overly influence our analysis of the business performance, as it is more of a function of the regulations rather than the operating performance of the company.
3. Stripping off net cash from the market cap, to reflect how much is used to buy the actual operating business, P/E is quite attractive at 13.
This is taking into consideration the unusually high tax expense of 87% of PBT.
4. Company was actively buying back its shares at around 24-25 cents a few months back.
5. Management also has share options with an exercise price of approx 21 cents. It is likely that the management will have the incentive to promote its value above the exercise price so that options will be in the money.
