Spindex Industries

[weijian]

Hello weijian,

thanks for your reply. Great explanation on paragraph 2 with regards to existing target coy capabilities unable to scale up and acquire more revenue.

I think for paragraph 1, is quite subjective. In my day to day life I have some knowledge on cnc machines. It is quite difficult to keep setting it for different products. Once set most machinist do not want to tweak till they have made enough quantities. So i suppose the main contractor would not want to buy a cnc machine (used to cost millions but now with china made could be cheaper) to undercut their subcontractors if the quantities is not significant.

hi wj1984,

There are different optimization methods for high mix/low volume and low mix/high volume mfg scenarios. For example, one could be dedicating certain tools for certain processes to minimize downtime. Since every industry is different, I will probably not try to elaborate further...

As for made-in-china CNC machines, a SME boss once boasted to me that her CNC machines are far superior to her Chinese peers and she has been active in those Guangdong trade fairs. That was 2 years ago and I am not sure if it still holds true now though. In the last decade, the Chinese have been pioneering a lot of new concepts - super app (Wechat), entertainment dining where queuing up is part of the experience (Haidilao), freemium gaming to blind box retail toys. Since their semiconductor and car mfg industry is coming up real fast, only a matter of time their "more advanced type" of mfg dominates I suppose.

[wj1984]

Hello weijian,

thanks for your reply. Great explanation on paragraph 2 with regards to existing target coy capabilities unable to scale up and acquire more revenue.

I think for paragraph 1, is quite subjective. In my day to day life I have some knowledge on cnc machines. It is quite difficult to keep setting it for different products. Once set most machinist do not want to tweak till they have made enough quantities. So i suppose the main contractor would not want to buy a cnc machine (used to cost millions but now with china made could be cheaper) to undercut their subcontractors if the quantities is not significant.

hi wj1984,

There are different optimization methods for high mix/low volume and low mix/high volume mfg scenarios. For example, one could be dedicating certain tools for certain processes to minimize downtime. Since every industry is different, I will probably not try to elaborate further...

As for made-in-china CNC machines, a SME boss once boasted to me that her CNC machines are far superior to her Chinese peers and she has been active in those Guangdong trade fairs. That was 2 years ago and I am not sure if it still holds true now though. In the last decade, the Chinese have been pioneering a lot of new concepts - super app (Wechat), entertainment dining where queuing up is part of the experience (Haidilao), freemium gaming to blind box retail toys. Since their semiconductor and car mfg industry is coming up real fast, only a matter of time their "more advanced type" of mfg dominates I suppose.

Hello weijian,

True on the optimization methods for different types of products.

Seems like you are also in the west side of Singapore industry. My regular supplier for machining now buys his cnc machine from china but my army friend who does o&g still swears by the European manufacturers which are a lot more expensive (huge capex therefore the downtime issue i mention earlier). I actually went to see the target coy website and the machines they are using looks like from Europe

[wj1984]

Finally after almost 8 years another offer to potentially take Spindex private...

https://links.sgx.com/FileOpen/Spindex_H...eID=854108

From the document can see its an external party making an offer, wonder if the Tans would make things difficult for the offeror to conduct DD like previously back in 2017...

anyway GVT which recently took private also had something similar...

June 1st they issued the same holding announcement... July 1st they gave an update and July 10th the offer was tabled...

valuation was at 1.4x NAV... That would be good news for Spindex if the valuations are the same... 1.5 x 1.4 = 2.1

we can only hope...

[dydx]

This time round the buyer is likely an outside party - possibly a PE fund or in the same or related trade. If the buyer is going for 100%, the Tans - who now have 75% - will have a chance to negotiate for a good and likely the best price. If the buyer wants to partner with the Tans to take Spindex private, in order to work any offer to the minority shareholders would have to be higher than the latest NAV/share (31Dec24: $1.50), with a good enough premium. If the buyer is happy to buy just a little less than 30% from the Tans, then there will be no GO for the minority shareholders but we will get to know what's the fair valuation in the eyes of the Tans. My wish is for the first possibility.

[wj1984]

This time round the buyer is likely an outside party - possibly a PE fund or in the same or related trade. If the buyer is going for 100%, the Tans - who now have 75% - will have a chance to negotiate for a good and likely the best price. If the buyer wants to partner with the Tans to take Spindex private, in order to work any offer to the minority shareholders would have to be higher than the latest NAV/share (31Dec24: $1.50), with a good enough premium. If the buyer is happy to buy just a little less than 30% from the Tans, then there will be no GO for the minority shareholders but we will get to know what's the fair valuation in the eyes of the Tans. My wish is for the first possibility.

Hopefully the tans will allow them to do their DD...

'However, Straits Times reported that Spindex ignored a request from a separate party on 23 Feb, to conduct due diligence on the company in relation to a potential offer. This was not made public until 3 Mar, when the interested party sent a second request to the company citing Rule 9.2 of the SGX Takeover Code, that it is obliged to disclose any information to other potential offerors.'

https://nextinsight.net/story-archive-ma...ball-offer

well if the tans made this announcement, it could be because the price could be enticing...

[weijian]

@wj1984,
I do not have an in depth understanding on Spindex's business and ops, but I know more about GVT than I do on Spindex. GVT's prospectus listed the usual suspects (UMS, Frencken) as its competitors and Spindex is missing - Therefore, I do not think that the comparison you made is anywhere near been apple-to-apple. In addition, an offer price is also highly dependent on the buyer's motivation. GVT buyer is Dutch and might be thinking about improving their cost structure via more offshoring of their manufacturing footprint. In this particular case, GVT which has a lot of brand new manufacturing capacity (in Penang) might had been a good fit.

[wj1984]

@weijian

thanks for the post. I believe spindex and GVT does machining works; albeit in different industries. Spindex in the white goods industry (lower value i suppose) vs GVT in semi-con...

at this moment we have no idea who the offeror is.. hopefully something materialize and we will know in due course..

[julianbream]

Full year results were out yesterday.

My eyebrows are raised at the 5.5 million SGD within Administrative expenses, pertaining to impairment of "property plant and equipment at Nantong to reflect the economic slowdown" (page 20 of the report)

To me, an economic slowdown is a different thing from impairment of property plant and equipment. Impairment of property plant and equipment should usually be due to damage, obsolescence, etc. These are not directly related to a general economic slowdown (which I know we could be experiencing).

So is this a valid accounting entry grounded in concrete reality? Or is it a suppression of profits and valuation?

[weijian]

Full year results were out yesterday.

My eyebrows are raised at the 5.5 million SGD within Administrative expenses, pertaining to impairment of "property plant and equipment at Nantong to reflect the economic slowdown" (page 20 of the report)

To me, an economic slowdown is a different thing from impairment of property plant and equipment. Impairment of property plant and equipment should usually be due to damage, obsolescence, etc. These are not directly related to a general economic slowdown (which I know we could be experiencing).

So is this a valid accounting entry grounded in concrete reality? Or is it a suppression of profits and valuation?

hi julianbream,

I refer to the accounting principles under note 2.8 of Spindex AR25, I quote the below (in italics with emphasis in bold):

All items of property, plant and equipment are initially recorded at cost. Subsequent to recognition, property, plant and equipment other than freehold land are measured at cost less accumulated depreciation and accumulated impairment losses. The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. The residual value, useful life and depreciation method are reviewed at each financial year-end, and adjusted prospectively, if appropriate.

From the bold portion, it does suggest that impairments to PPE does happen in theory. However, I do agree that large PPE impairment is relatively rare in practice  but that doesn't mean it wouldn't or shouldn't happen. In FY25 results, Mgt has provided the valuation assumptions (page15) to determine the recoverable amount for Spindex Nantong. Unfortunately, prior valuation assumptions for Spindex Nantong is not available in FY24/AR24 and therefore, the outsider does not have a comparison. While the current results are not audited by an external auditor but OPMIs will have a bigger problem if the external auditor eventually disagrees.

For Spindex OPMIs, there are probably some questions one have to clarify in the coming AGM.