Tai Sin

[Ben]

Have just finished reviewing TS results in details. Its core C&W business, which contributed 60% of Group revenue is still performing satisfactorily, with improvement in both top and bottom lines. The let-down is coming from its EMD and Test and Inspection segment. Both segments are showing an increase in revenue but lower profit as compared to last FY. In fact, for Test and Inspection, which is mainly Cast Lab acquired in Jan’12, it is showing a loss. This is a concern as the management of TS does not have the expertise to run Cast Lab. The management team of Cast Lab has up till 31 Aug 2014 to improve its performance and meet the financial targets set when they sell the company to TS in 2012. Failure to do so will risk them losing more shares of the company to TS. But that is cold comfort to me. If Cast Lab continue to not perform well, what is the use of having more shares of it?

Overall, I still think that TS will continue to do well financially in the near future, as the robust construction and infrastructure activities continue to support its C&W and EMD businesses. I would expect the company to meet its yearly dividends of ~ 2 cts, which is attractive at today’s price. Its PE is ony about 6.6X, while NTA is at 29.44 cts. However, its NTA would have been 36.38 cts had they not changed its accounting policy to value its leasehold and freehold land and building to a Cost Model from a Revaluation Model.

One more thing. If you go to their website, there is a picture of Changi airport control tower listed as one of its Recent Projects. They have been involved in previous Changi airport expansion projects, I hope they can also be involved in Changi airport future projects.

[Stockerman]

Hi, can we find out the reason for such an accounting change?

Was the NAV over-valued in the past? tks.

Its PE is ony about 6.6X, while NTA is at 29.44 cts. However, its NTA would have been 36.38 cts had they not changed its accounting policy to value its leasehold and freehold land and building to a Cost Model from a Revaluation Model.

[csccc]

Hi stockerman,
The reason can be found in page 11, point 5 I of the quarterly result..
Think it was not a question of over-valuing in the past, but instead marked at market value. It fluctuated accordi8ng to market value of the land..

Moving forward the value fluctuations should not affect anymore as the value at cost remains constant.. detailed reasoning spelled out in thr document..

[NTL]

Read the following in the Chairman's Statement in the latest AR.

Under C&W Segment:
"Beyond our shore, plans are being considered for entry into Myanmar, and a stronger presence in Batam where we have some commercial dealings. Where necessary, we may have to consider investing new facilities in promising new and existing markets."

Under EMD Segment:
"Going forward, the segment also intends to explore potential opportunities in Myanmar and other countries in the region, using singapore as a test-bed for its distributed products."

Under Other Business Segment:
"Our new acquisition, cast laboratories Pte ltd & its subsidiaries, contributed $27.78 million to the total group turnover for its first full-year reporting period. the group sees prospect in leveraging on its long-established presence in the commercial & Residential and infrastructure sectors locally to further grow its revenue stream. this segment will continue to expand its material testing, investigation and certification business into the region, namely; Malaysia, indonesia and Myanmar"

Look like Taisin is going all out to get into Myanmar.

[Ben]

“We are a transparent company driven by corporate governance and shareholder value…..” This is the mission statement of TS, and yes, they certainly lived up to what they said. They are one of the very few companies that disclosed directors’ remuneration in actual amount instead of in band. Bernard Lim and Bobby Lim earn $797K and $466K in FY2013 respectively. Despite achieving record revenue and profits in FY2013, Bernard remuneration increased by a meagre $15K, or 1.9%. I am sure this is far lower than the industry average of working class. Bobby Lim is worst, getting the same amount this year as compared to FY2012. Same for the other IDs, no pay increment this year.

I have no doubt that this is a transparent, prudent and pro shareholders company.

[Stocker]

Missed today agm, anyone who attended can share what were the highlights ? Thanks.

[valueinvestor]

Management less optimistic than last agm especially on the newly acquired cast-lab.

[NTL]

I do feel that acquiring Cast-lab is a mistake, for the following reasons.

1. No internal expertise within Taisin
2. The big error in the NTA of Cast-lab

Just hope that the 2 managements are willing to work hand in hand to deliver the values to the shareholders.

Just happen to see, Bobby Lim of Taisin is Bobby Lim of Cast-lab. So this is an "internal" acquisition?

[Stocker]

I do feel that acquiring Cast-lab is a mistake, for the following reasons.

1. No internal expertise within Taisin
2. The big error in the NTA of Cast-lab

Just hope that the 2 managements are willing to work hand in hand to deliver the values to the shareholders.

Just happen to see, Bobby Lim of Taisin is Bobby Lim of Cast-lab. So this is an "internal" acquisition?

Was it a BAILOUT ?

[NTL]

Read the following in the announcement of the acquisition.

"(1) the net tangible assets (“NTA”) of the Cast Lab Group as at 30 June 2011 was S$7,512,361

(2) the 6 months profit before income tax, minority interests and extraordinary items of the Cast Lab Group was S$120,368."

So they are paying at 1.14PB, and 18PE for the acquisition...

"(3) Mr. Bobby Lim, who is one of the Vendors, is disposing of 409,679 fully paid-up shares in Cast Lab at a total consideration of S$800,000 (which is equivalent to the sum he has paid for those shares)

(4) In addition, part of the proceeds received from the Subscription by Tai Sin will be used by Cast Lab to redeem its Redeemable Singapore Dollar Bond with an aggregate principal amount of S$700,000 currently held by Mr. Bobby Lim"

It seems like the acquisition of Cast-lab was to allow Bobby Lim to exit his investment in the company, and to pay for the bonds that he is holding.

Well... You may be right to say that it could be a bailout for Bobby Lim.