THE DISTRIBUTION of electronics components is a thin-margin business but Serial System attracts its share of loyal investors because it pays a dividend which is many times higher than any risk-free instrument.
And its chairman and CEO, Derek Goh, is a non-stop buyer of the company shares.
He bought 8.295 million shares last year - and 5.043 million shares yesterday at an average price of 12.58 cents after the early-morning release of FY2011 results.
The stock rose 0.1 cent to close at 12.5 cents. It has gained 25% in the year to date.
For FY11, Serial's dividend totaled 0.79 cent a share, including the proposed 0.33-cent final dividend.
The FY2011 dividend translates into:
- A payout of 53% of the earnings per share of FY11 (FY2010: 44%).
- A dividend yield of 6% based on a stock price of 13.085 cents, which is the mid-point of the recent 52-week trading range of the stock (9.40 – 16.77 cents).
Serial has maintained a payout ratio of 40-50% of net earnings in the past couple of years, which assures long-term shareholders of a decent yield as the stock price fluctuates.
In a meeting with analysts, Mr Goh highlighted that last year Serial System continued to outperform the Asia-Pacific semiconductor market.
Serial posted a 13% rise in revenue to US$617 million, compared to 4% for the Asia-Pacific semiconductor market.
But in Singapore dollar terms, Serial’s revenue growth was 3% owing to a stronger SGD vis-à-vis the USD.
As for net profit, Serial reported S$12.7 million, down 21.6% from FY10’s record $16.2 million.
This was mainly because, said Mr Goh, the company incurred higher expenses from the rising cost of labour in China and increased headcount (mainly in sales and marketing in China) to grow sales of newer product lines.
Serial System distributes IC devices for a number of vendors, including Texas Instruments, On-Semi, Avago, ADI, TE Connectivity, Osram and Ramtron, focusing on markets in China, Taiwan, Southeast Asia and South Korea.
While Serial has positive things going for it, a negative is its gearing ratio, which rose from 44% in 2010 to 72% in 2011.
In addition, its cash conversion cycle has gone up from 51 days to 70 days.
Mr Goh explained that as sales went up, Serial's bank borrowings had to go up too.
Customers are requesting for 60 days to pay, which is about twice as long as before. On the other hand, suppliers are not extending their payment periods in lock step.
Serial's press release and financial statements on its FY2011 results can be accessed on the SGX website.
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