XMH HOLDINGS may have had an earnings contraction in FY2011, but with a stock price of 19.5 cents, its proposed one-cent dividend still translates into a generous 5% dividend yield.
The company distributes 9 brands of marine and industrial engines, gearboxes, propellers and related components with a product catalogue of over 4,000 items.
It is Mitsubishi’s no.1 distributor for marine diesel engines. Other major reputable brands it deals in include Hyundai and Doosan from South Korea and SOLÉ, Korsør, Reintjes and CENTA from Europe.
Revenue fell by 5.8% to S$70.2 million due to a decrease in turnover of equipment sales offset by an increase in turnover from the after-sales services, trading and others. Gross margins remained unchanged at 27.8%.
Net profit fell by 48.9% to S$9.0 million, affected by the following factors:
1) Other income decreased to S$300,000, compared with S$1.6 million for FY2010. There were one-off gains on the forfeited deposits from customers of S$1.2 million and gains on disposal of property, plant and equipment of S$100,000 in FY2010.
2) Net finance costs rose to S$1.3 million compared to S$2.7 million for FY2010. This is mainly due to the translation of foreign currency monetary assets and liabilities to the functional currency of the subsidiaries, which is Japanese Yen.
Global demand for natural resources from Indonesia, coupled with the gradual implementation of the Cabotage Principle, is expected to continue to escalate demand for marine vessels to be built in Indonesia, particularly tugs and barges.
Sales to Indonesia grew 30.6% to S$43.5 million, while contribution to top line increased to 62% (from 44.7% a year ago).
The company remained in a net cash position, with cash reserves at S$53.9 million.
Order books are about S$70 million.
A final tax-exempt cash dividend of one cent per share was proposed.
CEO Elvin Tan and executive director Sam Chua met analysts on Thu for a briefing on the company's FY2011 results.
Below is a summary of questions raised at the meeting and the management’s replies.
Q: What is the currency exposure of your cost of goods sold?
We buy 60% to 70% of our products in Yen. We pay for European products in Euro and Korean products in USD. Our three main products are Japanese, European and Korean.
Q: What the currency breakdown of your accounts receivables?
60% to 70% is in Yen. The rest is in SGD, USD and Euro.
Q: If you sell in Yen and you hold cash reserves in Yen, you shouldn't be hit by Yen appreciation. Is the currency translation loss due to your IPO proceeds in SGD?
Yes, we also have some other SGD deposits.
Q: How long do you take to deliver an engine and what are your credit terms?
Korean products take one to 3 months to deliver. Japanese products like Mitsubishi take 7 to 8 months. When we secure a contract, we collect a deposit of about 25%. We then place an order with the factory. We collect the balance just before delivery. We typically don't give credit for new engines.
Q: How much does an engine cost?
Based on the most popular model, one pair of engine and gearbox sells for about US$150k to US$170k.
Q: Other than Indonesia, do other countries have the Cabotage Principle?
Some countries are implementing this partially. That is why we have set up some local offices.
Q: How are your principals responding to your in-house segment?
They are happy as our products complement theirs. They prefer to let us cover certain category of specifications that they do not wish to go into.
Q: What percentage of your sales is for third-party brands?
Most of it.
Related story: XMH: $12.7 Million Operating Cashflow In 9 Months