NASDAQ:APWC – 2,20 USD
Asia Pacific Wire & Cable Corporation Limited is a holding company that operates its business through operating subsidiaries and associates, which are principally located in Thailand, China, Singapore and Australia. The Company is engaged in the manufacture and distribution of telecommunications (primarily copper, but also fiber optic) and power cable, enameled wire and electronic wire products in the Asia Pacific region, primarily in Thailand, China, Singapore and Australia. Its segments include North Asia region, the Thailand region and the Rest of the World (ROW) region. It manufactures and distributes its own wire and cable products (Manufactured Products), and also distributes wire and cable products (Distributed Products) manufactured by its principal shareholder, Pacific Electric Wire & Cable Co., Ltd., and other third-party suppliers. The Company also provides project engineering services in the supply, delivery and installation of power cables to certain of its customers. – Google Times
1. Adequate margin of safety (criterion a) or b) must be met):
a)
- P/NCAV < 1x
- 0,36x ✓
&
- EV/Operating earnings(5y&10y) < 3x
- 5y = 7x X
- 10y = 6x X
b)
- P/NCAV < 0,76x
- 0,36x ✓
&
- NCAV-burn rate > -25 % for Qx – Qx-4 and Qx – Qx-1
- Qx – Qx-4 = -2 % ✓
- Qx – Qx-1 = +4 % ✓
2. The risk of permanent loss is low:
2.1 The risk of bankruptcy is low (criterion a) or b) must be met):
a)
- Debt/Equity < 25 %
- 24 % ✓
b)
- Z-score ≥ 3
- 2,1 X
&
- Debt/Equity < 50 %
- 24 % ✓
2.2 The company’s business model is not totally unprofitable (criterion a) or b) must be met):
a)
- Positive retained earnings:
- 47,4 M$ ✓
b)
- Positive aggregate operating income for the last ten years:
- 137,7 M$ ✓
3. The risk of share dilution is low (criterion a) or b) must be met):
a)
- Share dilution < 2 % for Qx – Qx-4 and Qx – Qx-1
- Qx – Qx-4 = 0 % ✓
- Qx – Qx-1 = 0 % ✓
b)
- The company has net repurchased shares during the last ten years:
- APWC has not issued any new shares during the last ten years.✓
- The company has no active stock options program.
- The company made two small buybacks year 2013 and 2012.
- APWC has not issued any new shares during the last ten years.✓
4. The risk of fraud is low (overall assessment on the basis of the answers below):
- Today’s management has not historically been linked to fraud:
- APWC current management have not historically been linked to fraud. ✓
- However, the largest shareholder of APWC (Pacific Electric Wire & Cable Co., Ltd. “PEWC”) was delisted from the Taipei stock exchange in 2003, after a number of former executives was involved in a major corporate scandal (fraud and embezzlement). The legal process between APWC and former executives is in some parts still ongoing.
- APWC current management have not historically been linked to fraud. ✓
- The company is not mainly Chinese (business and/or majority shareholder):
- Taiwanese/Chinese company with the majority shareholder PEWC (owns 75 % of APWC) from the same region. X
- A number of APWC directors and officers also hold positions in PEWC.
- APWC is not a reverse merger, the company IPO’d on the pink sheets in early 2000. In 2011 APWC was listed on the NASDAQ stock exchange.
- Taiwanese/Chinese company with the majority shareholder PEWC (owns 75 % of APWC) from the same region. X
- Company data exist for the last ten years:
- Yes. ✓
- The company has during the last ten years been audited by Ernst & Young.
- Yes. ✓
- The company has repeatedly allocated capital to shareholders (dividends and/or share buybacks):
- APWC has not paid a dividend or done any major shares buybacks over the last ten years. X
- The CEO and/or insiders have ownership incentives (worth of shareholding / salary + bonus > 3x)
- CEO = The company doesn’t specify compensation or ownership on a individual basis. X
- Insiders = 0,1x X
Other notes:
- A 13D-report was filed in June by Lonsin Capital stating that they own 5,2 % of APWC.
- In connection to the 13D they have posted two analyses on Seeking alpha:
- 1. APWC’s director finally giving positive signs concerning increasing shareholder value.
- 2. Asia Pacific Wire & Cable Corp. Activist Fund Seeks Actions Not Just Words From The Management Board
- The activism by Lonsin has resulted in the newly implemented dividend policy (see link above). See also APWC answer to Lonsin shareholder’s letter.
- In connection to the 13D they have posted two analyses on Seeking alpha:
- PEWC bought 10% of total shares in August 2015 at $5.11 from MSD Capital (132 % above current stock price).
- APWC owns 51 % of the publicly traded company Charoong Thai Wire and Cable Public Company Limited (“Charoong Thai” or “CTW”). CTW has a market capitalization of 121,8 M$ and a book value of 113,5 M$.
- APWC is a nano-cap stock: 30 M$ in market capitalization. The trading is very illiquid.
Disclosure: The author is long NASDAQ:APWC when this analysis is published.
Cigarrfimpar 