Saturday, March 12, 2011

Another dividend stock: P.I.E Industrial

Forget about the sky high oil price, sovereign debt, Japan earthquake, etc for a while. Focus on businesses that printing money.

Most people have been pretty bearish about technology stocks. Technology index has plunged by almost 40% and has been on the down trend for almost 1 year. It's almost 20% below 200-day MA, pretty depressed I think.

I know Jim Rogers is shorting Nasdaq but when he closes his trades, he will never tell you. It's all depending on the situation based on his reasoning. He has been bearish about dollar on the long term but when it became depressed in the short term, he bought USD.

P.I.E core business is EMS and raw wire cable manufacturing(automotive, medical and energy industries). See below chart on the 2009 revenue contribution from various segments.

Despite of so called being in the electronic and technology industry, it's not a very capital intensive business at all. They only spend a few million (RM 2 -5 million) for CAPEX compared to 20-30 million profit/year. (Click on the below chart on financial highlights)

They have more than 100 million cash on their balance sheet and debt free.

They have been paying generous dividend around 0.35 - 0.39 in the last three years. At RM 4/share, this company paying you 8.7% gross dividend.

What I did not like about the stock was lack of growth characteristic while operating in a very cyclical sector. They have been buying properties to burn their cash, not a bad thing but it was a weakness that the management has more money than ideas.

But then I saw this in the Star, this excite me a little bit because they finally putting RM 50 million to expand production capabilities. I don't think this is going to affect the dividend payout as they have enough cash. I think they are also smart enough to target at the high end and not the low end. I do think they have enough know how looking at the background of mother company and their management. The MD was from Intel and has extensive experience in rubber and plastic industries. If Foxconn can make stuff for Apple and HP, I don't think this is going to be an issue, unless Foxconn does not want to transfer their know how.

(The Star)GEORGE TOWN: P.I.E. Industrial Bhd is investing about RM50mil this year to expand its production capabilities in line with the growing demand for high-end medical, telecommunication, and computer markets.

P.I.E. managing director Alvin Mui told StarBizWeek that the group, a business unit under Foxconn, had recently obtained the ISO 13485 certification, enabling it to manufacture more complex electronic parts used in surgical equipment.

“Our involvement in the medical sector was limited before. The certification allows us to tap into the medical industry more aggressively.

“We will also manufacture special paper-based packaging materials for surgical gloves and medical devices,” he said.

P.I.E. would also use the investment to start a new converter business division to provide milling, die cut, and silk-screening manufacturing services for the trendy consumer electronics, telecommunication, and computer markets, Mui said.

The new initiatives would start in the second half of this year, Mui added.

“We have already received orders from new and existing customers for such products,” he said.

On the group’s core products such as scanners, measuring sensors, and assembled cables and wires, Mui said demand from the United States and Europe was still strong.

“Based on current orders for new and existing products, we expect a rise in orders by 20% to 30% this year from last year,” he said.

They have reputable shareholders like Foxconn, iCapital and Public Mutual funds as owners make me begin to like this stock.

Disclosure: I don't have direct position but intend to do so without notifying you. So do your own research and conclusion.

P.S. I'll be in China again for a week, so I'll try to do 1 - 2 scheduled posting while I'm away. Good luck.

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