Excerpts from analyst's report

UOB Kay Hian analyst:
 Loke Chunying


» Sunningdale Tech is trading at 11.1x FY13 PE with a dividend yield of 3.5%. 

» Although 9M14 revenue dipped 3.9% yoy, 9M14 net profit jumped 71.6% to S$16.5m due mainly to a S$5.2m gain on disposal of non-current assets. Cash flow generation continue to remain strong, with free cash flow of S$8.6m generated for 9M14. 

samgoi5.14Billionaire Sam Goi bought a 8.33% stake in Sunningdale in June 2014. NextInsight file photo» Sunningdale Tech (Sunningdale) is a leading manufacturer of precision plastic components, with a global presence in countries such as Singapore, China, Hong Kong, Europe and America.

» Firepower from the big boys... In Jul 14, Yarwood Engineering and Mr Sam Goi collectively subscribed to 153m of new shares in Sunningdale at S$0.1633/share, representing 16.7% of the enlarged share capital of the company.

» …as Sunningdale opens fire. With additional capital from the share placement, Sunningdale went on to acquire Anchorage Singapore, whose wholly-owned subsidiary First Engineering is principally involved in the manufacture and sale of precision moulds and precision engineering components.

» Ready to fly in 2015. Following the acquisition, Sunningdale will become one of the largest precision plastic engineering companies with annual sales of more than S$600m. The acquisition is complementary in nature and will allow Sunningdale to expand its blue-chip customer base and product offerings, as well as expand its global footprint with immediate access to the Indian market.

Koh-Boon-HweeKoh Boon Hwee is non-executive chairman of Sunningdale -- and owns 37 m shares of the company.As the acquisition of Anchorage was completed only in Nov 14, we expect Sunningdale to start enjoying meaningful contribution from Anchorage only from 2015. For FY14, Anchorage had a net profit of US$3.4m (S$4.4m).

» Strong cash flow generation and robust balance sheet. As at 30 Sep 14 Sunningdale had a net cash position of S$58m. While we expect Sunningdale to move into a net debt position following the acquisition of Anchorage in Nov 14 for S$82.7m, net gearing is expected to remain relatively healthy with the group’s strong cash flow generation ability.

With the exception of FY11 (where Sunningdale made two major acquisitions), Sunningdale has typically generated very positive free cash flow of more than S$9m for the last five financial years.

» Consistent dividend payout. As a result of its strong cash flow and robust balance sheet, Sunningdale has been able to consistently pay out dividends. For 2013, Sunningdale paid out a dividend of S$0.007/share, which translates to a dividend yield of 3.5%.

See also: Joseph Yeo: My 5 Small-Cap Picks For 1Q2014

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-2 #1 Dane 2015-02-14 18:59
Anchorage acquired for $83 m when its FY2014 net profit was $4.4 m. That's about 19X historical earnings, which is pretty steep. Or does it imply that Anchorage's forward earnings will be significantly higher? It has to be at least double (ie 8 million) to be "fairly valued".

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