Global Testing

[CY09]

This stock has come to my attention after noticing it has been buying back its shares for the past 2-3 years constantly. It has constantly produced positive cash flow (operating - investing) for many quarters.

Quite commendable, any VB forumers who know about the business model and industry it is operating in?

[CityFarmer]

This stock is new to me. A brief on the company below. I saw big names e.g. TSMC, UMC and Marvell.

The IPO price is $0.30 in 2005, and the market price now is $0.08, a drop of more than -70%. A glance at the FR, it seems not a very profitable business.

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The Company was incorporated in Singapore on 30 July 2004 under the name Global TestingCorporation Limited. The Group is principally engaged in the business of providing testing services such as wafer sorting and final testing services to the semi-conductor industry, focusing on logic and mixed signal semi-conductors used in consumer electronics and communication devices. As part of its testing services, the Group also provides test program development, conversion and optimisation services, and load board and probe card design, and leasing of testers to its customers for trial and pilot testing purposes on an ad hoc basis. The Group's main testing facilities are in Hsin Chu, Taiwan. It also has a testing facility in California, USA. Its customers include Taiwan Semiconductor Manufacturing Company Limited (TSMC) and United Microelectronics Corporation (UMC), MarvellTechnology Group Limited, ALi Corp, Realtek Semiconductor Corp and Sunplus Technology Co Ltd. The Group will continue to focus its efforts towards provision of wafersorting of mixed signal semi-conductors to fabless companies and integrated devices manufacturer where it typically enjoys better margins. The Group plans to increase its capacity to cater to the increasing demands from its customers.

[KopiKat]

IIRC, they were listed in Taiwan in the 2nd or 3rd or ?? board before they decided to IPO here. Their biz is in providing Assembly & Test Services for Semicon, very much like STATS & UTAC, but at a much smaller scale. What was most amazing back then was their NPM were in the high 20s and even hitting 30% from listing (in S'pore) till Q307 compared to UTAC (10s) & STATS (single digit) back then. From then on, it's been mostly downhill...

I stopped following in Q111 altho' I do occassionally glimpse thro' their financials. Something doesn't seem right to me but I'm not good enough to figure out what... They have losses more often than profits but they continue to do shares buy-back... also no dividends... not growing...

[cherks]

IIRC, they were listed in Taiwan in the 2nd or 3rd or ?? board before they decided to IPO here. Their biz is in providing Assembly & Test Services for Semicon, very much like STATS & UTAC, but at a much smaller scale. What was most amazing back then was their NPM were in the high 20s and even hitting 30% from listing (in S'pore) till Q307 compared to UTAC (10s) & STATS (single digit) back then. From then on, it's been mostly downhill...

I stopped following in Q111 altho' I do occassionally glimpse thro' their financials. Something doesn't seem right to me but I'm not good enough to figure out what... They have losses more often than profits but they continue to do shares buy-back... also no dividends... not growing...

Anyone has a view on this company, post-consolidation/capital distribution?

After consolidation, its FY2014 eps would be around S$0.11. Of course, FY2014 result saw a large increase in NP. Its PE/share based on FY2014 result is around 12x.

Its NPM for FY2014 has also improved greatly, but it is left to be seen if it can be further improved or at least maintained with rising revenue, perhaps.

Provided it could show improvements to its NPM going forward, I think this is a fair PE/share value though it is greatly below industry average.

It has been able to generate positive FCF from its operations for many years, though.

[Nick]

Earnings will have substantial growth over the next few years due to the reduction in depreciation expense though cash earnings may have virtually no growth if revenue doesn't pick up. They have posted losses in the past due to the heavy depreciation expense which masked the underlying profitable. EBITDA margin has historically exceeded 45% and generated substantial free cash-flow. The interesting thing about this company is how they used their free cash-flow in the past to reduce their share float from 1050 million to 707 million shares while growing their cash hoard to over US$38 million. With the recent restructuring which wipes out their accumulated losses and return virtually all the cash to shareholders, they will be able to pay a dividend (but constricted by their earnings). Judging by the high cash-flow yield exceeding 25%, this could turn to a high yield play in the near future.

Essentially, what has changed is their depreciation expense has been reduced substantially as most of the equipment has been written off (though still functioning) thereby boosting profitability enabling them to pay a dividend in the future with retained earnings. There are plenty of business risk for this Company though despite their superb cash-flow history. A catalyst would be a dividend policy or continued share buy backs. Major risk is a semiconductor downturn or TSMC seeking business elsewhere.

(Vested)

[Curiousparty]

Market cap of ~$100mil. Any parameters we can track from the outside pls? (e.g. indicators on orders, industry trend indicators, etc.)
How much of its EPS will be recurring on a sustainable basis? (multiple this figure by 20 times to roughly gauge its fair market price).
many tks.

[Nick]

Market cap of ~$100mil. Any parameters we can track from the outside pls? (e.g. indicators on orders, industry trend indicators, etc.)
How much of its EPS will be recurring on a sustainable basis? (multiple this figure by 20 times to roughly gauge its fair market price).
many tks.

Market cap is merely (35.3 x 1.35) = S$47.7 million.

The FCF over the past two years were US$10 million.

(Vested)

[grubb]

I have not looked at the company, but in my opinion, I think the biggest risk is technology obsolescence. Advanced Semiconductor Engineering, Siliconware Precision Industries, Amkor, STATS Chipac etc are the biggest in the industry, and lots of other smaller ones listed in Taiwan. Depreciation may be reduced, but may I ask whether there is a niche within the testing industry that the company provides? There is a very real risk of the company being forced to invest substantially in new PPE, which will increase depreciation again and take away the distributable profits.

[whatamidoing]

Market cap of ~$100mil. Any parameters we can track from the outside pls? (e.g. indicators on orders, industry trend indicators, etc.)
How much of its EPS will be recurring on a sustainable basis? (multiple this figure by 20 times to roughly gauge its fair market price).
many tks.

Market cap is merely (35.3 x 1.35) = S$47.7 million.

The FCF over the past two years were US$10 million.

(Vested)

People who got in at 8 cents to 12 cents would have made quite a bit.

In their 1Q report, we can see that depreciation has started to taper off (down by 1.5m QoQ). Although revenues were stagnant, this resulted in higher net income.

Only question I have is that - has anyone noticed that their cash balance is insufficient to pay off the dividend? It's around 48m when the dividend in total is ~53m. They would have to draw down debt or put in a better operating performance in 2Q.

[Nick]

Market cap of ~$100mil. Any parameters we can track from the outside pls? (e.g. indicators on orders, industry trend indicators, etc.)
How much of its EPS will be recurring on a sustainable basis? (multiple this figure by 20 times to roughly gauge its fair market price).
many tks.

Market cap is merely (35.3 x 1.35) = S$47.7 million.

The FCF over the past two years were US$10 million.

(Vested)

People who got in at 8 cents to 12 cents would have made quite a bit.

In their 1Q report, we can see that depreciation has started to taper off (down by 1.5m QoQ). Although revenues were stagnant, this resulted in higher net income.

Only question I have is that - has anyone noticed that their cash balance is insufficient to pay off the dividend? It's around 48m when the dividend in total is ~53m. They would have to draw down debt or put in a better operating performance in 2Q.

The financial statements are in USD and it had weakened against the SGD slightly since it was initially announced.

Cash as of 31 March 2015: US$39.3 million = S$53.1 million. (1 USD = 1.35 SGD)

I suspect once the SGD equivalent has been met, they will convert it to SGD. They are paying out all the cash they had in 4Q 14 to shareholders before the USD depreciated. If necessary a bridging loan could be taken and they can use their operating cash-flow to repay it.

Share price appreciated substantially yesterday and is currently trading at $1.54 or a market capitalization of S$54.4 million or US$40.3 million. This is approx 4 x FCF.

(Vested)