MFG Integration - Special Dividend/Capital reduction

MFG Integration is overlooked by investors. A brief description:

It has 2 businesses, Semiconductor equipment business and Contract equipment business (CEM). It's outstanding shares is 229M shares.

Summary:
1) It just sold it's Semiconductor equipment business for $84.5M (proceeds) , completed on 20/2/2019. Received cash of around $68M (now with company) and cash of $16M (in escrow account with ICBC singapore)

2) It intends to return ALL the proceed minus away expenses which works out to be $77M to shareholders via capital reduction/special dividends.

3) After distributing all the proceed of $77M, remaining CEM business will have a NTA of 15 cents, including 7 cents net cash.

4) The $77M is going to be returned to shareholders in 3 payments.
a) 1st payment of 24 cents per share expected to be paid soon. I expect it to be around May/June, once they get the document ready for capital reduction OR during the Q1/19 financial statement to announce special dividend.


b) 2nd payment of $8M (in escrow account) or 3.5 cents per share if revenue of the semiconductor business from 1/1/2018 to 31/1/2019 meets $46M.
So far, the full year revenue for 2018 is $36M. So assuming average 1Q = $9M. The expected revenue for 1/1/2018 to 31/1/2019 should meet or slightly less than $46M. Assuming the revenue is $45M. So the difference between $46M and $45M resulting in a shortfall of $1M. The $1M will be returned to the buyer resulting in shareholders getting $7M as dividend which works out to be 3 cents per share.
This 3 cents is expected to be paid out after the results for Q1/19 is annouced as they need the report to calculate the difference between actual revenue and $46M.
So I expect this 3 cents to be paid around July/August as Q1/19 results will most likely be annouced in May this year.

c) 3rd payment of $8M or 3.5 cents per share. If buyer is satisfied and give the all clear or the buyers did not initiate claims within 18 mths, then this 3.5 cents will be paid out anytime from now(if buyer gives all clear) or after 18 mths from completion date (no claims from buyer) which is around August 2020.

5) NTA of remaining CEM business after returning all the proceed from the sale of the semiconductor business will be 15 cents including 7 cents net cash.

So u are potentially getting a total dividend of 31 cents and a company with a CEM business and NTA of 15 cents for the price of 33 cents (market price now).

So basically u are paying 2 cents for a company with CEM business and NTA of 15 cents.

Assuming the trading price of 12 cents below the NTA of 15 cents, u will be having a profit of 10+ cents per share based on ur initial purchase price of 33 cents within the
timeframe of about 18-20 mths.

And who knows, they may even decide to return the remaining 7 cents net cash too.

1. Declaration of Interim tax exempt (one-tier) dividend of 15.5 Singapore cents per ordinary share for the financial year ending 31 December 2019
The board of directors (the “Board”) of Manufacturing Integration Technology Ltd. (the “Company”) is pleased to announce that the Company has declared an interim tax-exempt (one-tier) dividend of 15.5 Singapore cents per ordinary share (the “Interim Dividend”) for the financial year ending 31 December 2019.
2. Background of the Interim Dividend
The Interim Dividend forms part of the distribution that the Company wishes to distribute to its shareholders using the net sale proceeds arising from the disposal by the Company to MIT Semiconductor (Tian Jin) Company Limited (砺铸智能设备(天津)有限公司) of the entire issued and paid-up share capital of MIT Semiconductor Pte. Ltd. at a cash consideration of up to S$84,500,000.
The Company had, in its announcement dated 18 July 2018 and in its circular to shareholders dated 2 January 2019 (the “Circular”), informed shareholders of its intention to distribute the entire net sale proceeds arising from the Disposal to its shareholders should the Disposal be successfully completed. Upon successful completion, it expects to make an initial pay-out amounting to 24 Singapore cents per share.
The Company had, on 20 February 2019, successfully completed the Disposal based on the cash consideration of S$84,500,000. Consequently, the Company had, on the same day, received 80% of the Sale Price amounting to S$67,600,000 and the balance 20% of the Sale Price amounting to S$16,900,000 (the “Escrow Amount”) is being held by Industrial and Commercial Bank of China Limited, Singapore Branch, the escrow agent jointly appointed by the Company and the New Purchaser. Further details relating to the escrow arrangement and the release of the Escrow Amount are set out in the Circular.
The Company has therefore declared the Interim Dividend of 15.5 Singapore cents per share in accordance with the provisions of the Companies Act (Cap 50).
It expects to pay out another 8.5 Singapore cents per share via a special dividend after effecting a capital reduction. This is necessary as the Company does not have enough of retained earnings to pay out further dividends. Details of the special dividend and capital reduction will be announced when it is ready.
2
3. Notice of Books Closure Date and Payment Date for the Interim Dividend
NOTICE IS HEREBY GIVEN that the Share Transfer Books and Register of Members of the Company will be closed on 5 April 2019 for the preparation of dividend warrants in respect of the Interim Dividend.
Duly completed and stamped registrable transfers received by the Company’s share registrar, Boardroom Corporate & Advisory Services Pte. Ltd. at 50 Raffles Place, #32-01 Singapore Land Tower, Singapore 048623, up to 5.00 p.m. on 4 April 2019 will be registered to determine shareholders’ entitlements to the Interim Dividend.
Shareholders (being depositors) whose securities account with The Central Depository (Pte) Limited are credited with ordinary shares in the capital of the Company as at 5.00 p.m. on 4 April 2019, will be entitled to the Interim Dividend.
Payment of the Interim Dividend will be made on 12 April 2019.
By Order of the Board
Manufacturing Integration Technology Ltd.
Lim Chin Tong
Executive Director and Chief Executive Officer
22 March 2019

The total dividend to be given out is $77M.

15.5 cents interim + 8.5 cents capital reduction = 24 cents (as stated in the circular for EGM) = Total about $56M.

The remaining roughly $5M (2 cents) + Escrow amount $16.9M (7 cents) will be paid subsequently through a series of dividends.

So April we will get 15 cents.. Then maybe June after capital reduction we will get 8.5 cents. Then later we may get the final dividend for the remaining $5M. Then we will get the 1st of the dividend from the Escrow account and finally the last of the dividend from the Escrow account.

So to summarised: What I think....
Interim : 15.5 cents ($36M) in April
Special dividend/capital reduction: 8.5 cents. ($20M) in June/July
Final: 2 cents ($5M) in August?
1st Special dividend from Escrow: 3.5 cents ($8.5M) in August?
2nd Special dividend from Escrow: 3.5 cents ($8.5M) by Aug 2020 (18 mths)

Total = $77M (roughly)


Even without the final 2 cents (which I am not very sure), u still potentially going to get 24 cents + 7 cents (Escrow) = 31 cents dividend.

I not the only one who think that the final total dividend should be 33 cents.

Great call, divads. I must follow closely your future posts on other stocks!

btw, regarding the NTA of the CEM business, how did you calculate 15 c/share?

Capital reduction coming soon lai lai !
8.5 cents a share


links.sgx.com/FileOpen/Announcement_capi...cement&FileID=548680