NICO STEEL: Turnaround in sight?

It's the rare Singapore company that supplies parts, or material for making parts, in electronic gadgets sold globally. Danny Tan, Executive Chairman and President of Nico Steel Holdings. NextInsight file photo.ItIt's even more improbable that a Singapore company can be the sole supplier. Yes, AEM Holdings comes to mind -- and AEM is the sole supplier of equipment -- specifically, high-density semiconductor test handlers -- to Intel Corp. Key parts suppliers include: Memtech International and Hi-P. Now a micro-cap Singapore company --Nico Steel Holdings -- has just become known to investors as being the sole supplier of certain materials used in manufacturing parts in global brands of consumer electronic devices.

The following table says it all. It comes from a corporate presentation that Nico uploaded to the SGX website on 4 Sept. 

Nico is no newcomer to investors: It listed on the Singapore Exchange in 2005 as a low value-add provider of steel processing services.

The Nico of today capitalises on its long experience with, and deep expertise in, the chemistry and processing of a range of metals and materials, not limited to steel.

It offers proprietary metal alloy products under its Nico brand.

When global brand owners accept these materials, Nico sells them (in bulk) to OEM manufacturers that produce parts for the latest smartphones, tablets and other gadgets.

Nico says it:

♦ Develops patented production technology.

♦ Customises metallurgical solutions.

♦ Provides customised services to enhance features of metal materials for OEMs.

Nico has a market cap of only S$10-15 million (depending on whether the stock price is 0.2 cent or 0.3 cent).

That reflects its recent loss-making years, it being placed on the SGX watchlist in Sept 2016, and the huge dilution from the conversion of convertible bonds into equity by an investor.

It has indeed gone through very tough times.

Turnaround in the making?

With a US$34,000 net profit (on US$13.2 millon revenue) for the financial year ended Feb 2018, is Nico on the cusp of an upturn in profitability?

Read pages 27, 28 and 29 of Nico's corporate presentation.

(The presentation was delivered at its Sept 4-10 "non-deal roadshows" -- the first investor outreach in many years).

Those three slides on pages 27, 28, and 29 refer to three Nico projects that have just begun, or will be coming on stream.

In these cases, Nico's material solutions have been accepted by three global brand owners who are unnamed but readers should know who they are:

No revenue estimates were given by Nico for those supplies, so we'll just have to wait for the official results announcements to gauge the impact.

Nico, by the way, has just announced the termination of a convertible bond agreement: Click here.

1 Oct update: Phillip Securities has put out a report on Nico Steel. Click here.