The share price of Tai Sin Electric fell to S$0.40 after the company released a set of poor results. Despite increasing copper prices, it is heartening to know the company posted a revenue increase in the Cable & Wire business segment although gross profit margin was lower. This segment makes up the largest percentage of the company revenue.
Overall, the company cash and cash equivalent decreased to $19.74 million compared to $22.08 million at the end of the last period. This is a 10.6% decrease in cash flow. In summary, the company suffers from higher administrative expenses such as staff costs, foreign exchange loss (weaker US dollar against Singapore dollar) and higher advertising and marketing expenses in Vietnam.
Cable & Wire (C&W)
The Cable & Wire segment posted an increase in revenue of $15.5 million. Tai Sin Electric attributed this to the surge in copper prices and higher delivery to the Commercial and Residential and Infrastructure sectors in Singapore. Despite higher copper prices, the company is still able to report higher revenue which means they can pass the increase in copper prices to the customers.
Myanmar market reported a decline in revenue due to lower export. Malaysia and Vietnam also reported a decline in revenue due to market slowdown in the region.
Electrical Material Distribution (EMD)
Revenue for this segment grew by $6.88 million. The increase was due to higher sales to the industrial building and electronic clusters.
Switchboard (SB)
I dislike it when Tai Sin Electric did not report any financial figures relating to this business segment (I cannot find any report on this in their announcement). The reason may be because this segment only makes up roughly 2 percent of Tai Sin Electric’s operating revenue which is insignificant?
Test and Inspection (T&I)
Revenue for the Test and Inspection segment was down by $1.82 million. This was due to the decrease in Non-destructive Testing and Heat Treatment revenue from Singapore and Indonesia.
My Thoughts
Tai Sin Electric surely have the capability of passing the increase in copper prices to their big customers. The continued effort of trying to penetrate the other markets such as Vietnam and Myanmar will continue to draw down from their cash and cash equivalents as these are all costs to the company.
This company will grow further if it manages to conquer the Vietnam or Myanmar market but I doubt it will be anytime soon. I read about many other companies also trying to penetrate into the Vietnam and Myanmar market but have not heard of any success stories yet.
Meanwhile, I shall hold on to this company in my spouse’s stock portfolio as it was able to sustain its dividend payout in the near term but will need to watch out for its cash and cash equivalent on hand.
An interim dividend of 0.75 cents was declared.
‘Despite higher copper prices, the company is still able to report higher revenue which means they can pass the increase in copper prices to the customers.’
Is this really the case? If yes, why is the gross profit margin of 17.5% much lower than 6 mth FY16 of 21.4%?
Or is it a case of Tai Sin getting more customers or orders at a lower selling price?
Hi CS Jacky, just my personal opinion.