Venue: Serial System HQ, Ubi View
Time & date: 10.30 am, 23 April 2011
SERIAL SYSTEM said its 1Q (ended March 2011) net profit rose 10.3% year on year to S$3.2 million.
Revenue rose 4.1% to S$189.8 million as Serial continued to expand its product range and geographical markets, the key ones being Greater China and South Korea.
The figures were part of a presentation to a roomful of investors (including shareholders) right after Serial’s AGM on Saturday.
(See URL at the bottom of this article for Serial’s subsequent upload of presentation material to SGX’s website)
The audience also heard Serial chairman and CEO Derek Goh explain the attractiveness of Serial’s proposed acquisition of JEL Corporation.
Serial has, among two options, proposed to invest $7.4 million cash for a 57.6% stake in JEL, which will use total investment monies of S$10 million (including a capital injection from another investor) to discharge its debts.
Derek said Serial viewed as attractive JEL’s existing distribution network in regions such as Middle East and emerging markets in Asia (such as Vietnam, Cambodia, and Bangladesh), which Serial has not penetrated.
"JEL can be our new growth engine to enable Serial to grow faster," said Derek.
The value of the distribution network is reflected in the $349 million of sales achieved in FY06 before an accounting fraud to inflate the company’s profit brought the company down – and sent its former chairman-cum-CEO to jail. (JEL is not an S-chip, by the way.)
JEL achieved sales of about S$90 million last year and a net profit of $182,000.
Derek said Serial envisaged securing new consumer products for JEL to distribute, adding to JEL’s existing portfolio of IT, photographic and timepiece products.
Serial could add to JEL’s product range (from brand names such as Apple, Fujifilm, Samsung and Tag Heuer) by tapping on Serial’s network of existing clients (which includes LG, Hitachi and Panasonic) to whom Serial supplies electronic components.
In addition, Serial sees JEL’s existing distribution network as attractive because to build it up from scratch to achieve S$100 million in sales may take, say, a minimum of five years.
The proposed JEL acquisition would make JEL a 57.6%-owned subsidiary of Serial.
It is subject to regulatory and other approvals, including, most importantly, the approval of the Singapore Exchange of a 24-month extension ending 3 March 2014 for JEL to apply for JEL’s removal from the SGX-ST’s watch-list. This is expected to be known by next month (May).
Meanwhile, JEL's creditors have approved a Scheme of Arrangement yesterday, clearing a major hurdle for the proposed acquisition of JEL by Serial.
Healthy dividend payout
At the AGM, shareholders approved the final dividend for FY2010 amounting to 0.67 cent a share. Serial had paid 0.28 cent a share as interim dividend for FY2010.
The total dividend payout stood at a hefty 44% of its earnings.
The final dividend will be paid on May 13 and, assuming an unchanged 0.28 cent a share in interim dividedn payable in early September (as happened in 2010), the yield for holding Serial shares between now and August - which is four months - comes up to 6.3% based on the recent stock price of 15 cents.
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For Serial's Powerpoint presentation at the AGM, click here.
