Penny2.15

penny2.15bExecutive chairman & CEO Derek Goh at last week's results presentation.
Photos by Janine Yong


Derek2.15CEO Derek Goh in a jovial mood. Photo by Leong Chan TeikAFTER trading in a tight range for most of last year, Serial System's share price broke out, climbing from 13.3 cents to 14.3 cents -- or 7.5% -- in two days last week.

The run-up was triggered by its 4Q results release which showed that the 4Q net profit jumped 52% to US$4.6 million while the full-year's figure was up 44% at US$16.1 million.

As a result of the higher earnings, Serial's share price now trades at a historical PE ratio of just 6X.

Not only is the valuation looking palatable, so is the dividend yield at 7.3%. Serial is proposing a final dividend of 0.75 cents a share, after having paid out an interim FY2014 dividend of 0.30 cent a share. 

Furthermore, the stock price is at a discount to the net tangible assets per share of about 18 Singapore cents a share.

2014profitIn the electronics distribution business of Serial System, economies of scale and tight cost controls matter greatly.

These featured in its FY2014 results. Highlights:

» Surpassed FY2014 revenue target of US$1.0 billion to reach US$1.04 billion (FY2013: US$ 817.0 million).

» Net margin improved to 1.6% from 1.4% in FY2013.

» Total expenses as a percentage of sales declined to 7.4% in FY2014 from 8.0% in FY2013. 

» Turnover in North Asia (Hong Kong, China, South Korea, Taiwan and Japan) grew 30% y-o-y, accounting for 84% of the Group’s turnover.

Underpinning the business is its three-pronged strategy announced in Jan 2014 (see: SERIAL SYSTEM: US$1 b sales target, higher margins with enhanced biz strategy).

alex_wuiCFO Alex Wui. Broadly, Serial said the enhanced strategy involves:

a. Expanding Serial's product portfolio and increasing the proportion of higher-value components -- ie, what Serial sells.

b. Improve internal efficiencies with emphasis on financial management, supply chain management and business intelligence -- ie, how Serial will do certain things.

c. Deepen penetration in existing markets and widen geographical expansion -- ie, where Serial will go.

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