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My Personal Analysis of Nam Lee Pressed Metal

Nam Lee Pressed Metal Logo

Nam Lee Pressed Metal designs, fabricates, supplies, and install steel and aluminium products in Singapore and Malaysia. Carrier Transicold, buys aluminium frames from Nam Lee Pressed Metal for container refrigeration units and is responsible for more than 50% of its revenue.

Dividends

Nam Lee Pressed Metal pays out consistent dividend over the 5 year period (2011 to 2015).

However, I noted that the dividend payout ratio at minimum is 25% and at most is only 50% of their earnings.

Year 2011 2012 2013 2014 2015
Total dividend (cents) 1.5 1.5 2 1.5 1.5
Earnings per share (cents) 5 6 4 3 4
Dividend payout ratio (%) 30% 25% 50% 50% 37.5%

Debt

Nam Lee Pressed Metal has a low debt servicing ratio. However, I noticed that in the year 2013, the net operating cash flow from operating activities went negative. (Negative operational cash flow could signify a collections problem or poor debt structure.)

Operating income is also not consistent. This can be due to the industry that Nam Lee is in.

Year 2011 2012 2013 2014
Net interest expense (SGD dollar in thousands) 217 133 71 53
Operating Income (SGD dollar in thousands) 14,501 33,895 (14,672) 24,305
Debt service ratio (%) 1.5% 0.39% -0.48% 0.21%

Investment Moats

Group remains the only worldwide third-party manufacturer of aluminium frames for container refrigeration units in the world for a major customer.

In the current financial year, revenue from two major customers amounted to $87 million (2013: $77 million) arising from sales by the aluminium segment and $4 million (2013: $25 million) arising from sales by the aluminium and mild steel segment respectively.

~Nam Lee Pressed Metal Annual Report 2014

Benefit from U.S Economy Recovery

I expect Nam Lee to benefit from the recovery of the U.S economy. Top U.S importer, Carrier Transicold is one of Nam Lee Pressed Metal major customers.

Investment Strategy

As the shipping industry and export picks up, I expect Nam Lee Pressed Metal to benefit as well. Personally, I feel that this is a boring company with businesses only in the container industry and minority in the local construction industry.

There are no plans by Nam Lee to expand into other business and their business into other regions. I am currently vested in Nam Lee since 2012 for collection of dividends. However given the lack of growth in the company, I do not recommend buying this stock if you do not own it yet.

 

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