speakupOur reader, Walter Lim, first highlighted his stock pick, PCI Limited, on 14 Nov 2017, in a post in our forum.

PCI? It's some obscure stock which, on checking, is an electronics manufacturing services company and a 76.7% subsidiary of Chuan Hup Holdings. 

PCI's fundamentals did look impressive when Walter posted: "PCI posted a stunning Q1 result. 48% increase in revenue and 180% increase in profit."  

"Based on FY16 earning, trading at only PE ratio of 10 with 7.28% dividend yield."

The stock was trading at 78 cents then.


In several subsequent posts, Walter cheered PCI on -- and then yesterday the company announced the receipt of a takeover offer at $1.33.

 

3-year holding period: bought at end 2015

5-year holding period: bought at end 2013

Share price (on purchase)

49 c

44 c

Capital invested (10,000 shares)

$4,900

$4,400

i) Takeover offer (@$1.33)

13,300

13,300

ii) Cash dividends collected

$1,400

$2,900

Total (i + ii)

$14,700

$16,200

% gain

200%

268%

Average gain p.a.

67%

54%

Compounded annual gain

44%

30%

If you had bought PCI at 78 cents at the time of Walter's post, your gain would be 77% (including a 5-cent dividend) selling at the takeover price.

We took a look to see how this stock has done if you have held it for 3 years, and 5 years. 

The result: Hey, it's a gem!

Date of payout

Dividends

13 Nov 2014

10 c

12 Nov 2015

5 c

11 Nov 2016

3 c

10 Mar 2017

2.5 c

13 Nov 2017

3.5 c

07 Nov 2018

5 c

Its average annual gains were 67% and 54% for the past 3 years and 5 years, respectively, boosted by dividends every year (see table). 

An investor which has done well is Chuan Hup itself which made a mandatory conditional cash offer for PCI at 50 cents in 2011.

And now, Chuan Hup has given irrevocable undertakings to vote in favour of the takeover of PCI by Platinum Equity Advisors, a global investment firm with US$13 billion of assets under management.

So with Walter Lim having proved PCI to be a star pick, you may be wondering what other Singapore-listed stocks he has highlighted in our forum. 

We found several: Sunpower Group, Tat Seng Packaging, Hanwell Holdings ....

Use of Net Sale Proceeds: No mention of special dividend for Chuan Hup shareholders!

Chuan Hup's announcement said: "Based on the unaudited consolidated financial statements of the CHH Group as at 30 September 2018, the Company expects to realise a gain of approximately US$69,181,000 from the Proposed Disposal. The net sale proceeds from the Proposed Disposal are intended to be used as general working capital of the Company, which would further strengthen the Company's balance sheet, enhance the Company's financial flexibility and facilitate any plans by the Company to enhance shareholder value.

"The net sale proceeds could also be redeployed and reinvested in the property sector and potentially other business sectors if the right opportunity presents itself."

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    Comments  

    0 #1 GohHP 2019-01-05 13:05
    1. Going by their track record in the past, Chuan Hup has dished out large payouts on asset divestments before.This time round, given the size of the gain, would be strange if there were no special dividends. But the quantum may be modest relative to the divestment amount if they want to retain some proceeds to re-invest.

    2. PCI is their growth engine and contributes > 50% of group profits. After divesting this, CH will have to look for new opportunities to replace the lost income. Also need to reward major shareholder. So pay some keep some.
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