Poh Tiong Choon Logistics

[Nick]

I noticed that there has been heavy insider buying over the past 6 months in this small logistic company.

Adrian Ho has increased his stake from 6.24% (13.456 million shares) in June 2010 to 10.01% (21.6 million shares) in Jan 2011 by purchasing shares regularly over the past 6 months.

Poh Key Boon increased his stake in the company from 0 in Aug 2010 to 500,000 shares (0.23%) in Sept 2010.

PCAPL purchased 453,000 shares in Jan 2011 to boost its stake from 22.24% to 22.44%.

I wonder whether could something be brewing ? Could earnings experience a sharp jump with a bumper dividend being declared ? Its 1H 2010 earnings fell 70% to $3.7 million as compared to 1H 2009 though significantly better than 2H 2010 earnings of $2.3 million.

It will be interesting to see whether does insider buying points to better times ahead in this company ! I recalled failing to purchase Sunvic a few quarters ago - I was quite attracted to its heavy share-buyback program. But, I valued my capital preservation more and did not venture. No regrets

(Not Vested)

[lonewolf]

PTC has an unbroken dividend record from FY 2000 to FY 2009 and its been steadily rising year by year. Average div yield (based on FY end price not historical) is around 8.36%.

It has a positive operating cash flow for the last 10 years and generated FCF of 22 mil for last FY. It balance sheet is kinda ugly though as it current ratio has been less than 1 for the last 3 FYs.

Its also celebrating its 60th Anniversary this year, so maybe a bonus dividend could be on the card.

PTC would be releasing its FY 2010 results end Feb.

(Vested)

[mrEngineer]

Dividends were also cut by half in 1H 2010 so it is unlike of companies to cut dividends as they are quite sticky. Doubt any surprises upcoming but would be keen to monitor as well.

[Nick]

I have compiled PTC Log net profit and dividend trend over the past 5 years:

Data (Year, Net Profit, Dividend)
1H 06: $0.77 million (0.25 cents dividends)
2H 06: $1.59 million (1.00 cents dividends)
1H 07: $3.06 million (1.50 cents dividends)
2H 07: $4.61 million (1.25 cents dividends)
1H 08: $2.38 million (0.75 cents dividends)
2H 08: $7.24 million (1.55 cents dividends)
1H 09: $12.1 million (1.50 cents dividends)
2H 09: $2.24 million (2.00 cents dividends)
1H 10: $3.63 million (0.75 cents dividends)

It is quite interesting to note that PTC Log has paid shareholders 10.55 cents worth of dividends over the past 4.5 years which translates to an average distribution of 2.34 cents per year. At the moment, PTC has 215.787 million shares which gives rise to a market capitalization of $96 million. The earnings looks terribly cyclical when examined in a semi-annual basis but when we look at it in a yearly manner it seems to be trending upwards from 2006 to 2009. I have not looked much at the business. 2H 08 and 1H 09 was its bumper year. Not too sure why earnings dropped massively after that.

Perhaps forummers with a better under-standing of the logistic business in Asia could share their views on this matter ?

(Not Vested)

[lonewolf]

PTC released a set of disappointing numbers for its FY2010 results.

Revenue down 13%
PBT down 30%
Net Profit down 30%
EPS down 30%

Cash from operations down 60%
FCF down 65% (despite drop in CapEx of 50%)

Final dividend is maintained at 2c bringing total dividend for FY10 to 2.75c down from 3.5c in FY2009. No special dividends.

PBT Margin and Net Margin is 12.3% and 10.6% respectively (down about 3%)

So much for premise that there is only 1 reason why directors/substantial shareholders will buy.

[Nick]

I wouldn't say it is a bad result when we look at it in a sequential perspective.

Data (Year, Net Profit, Dividend)
1H 06: $0.77 million (0.25 cents dividends)
2H 06: $1.59 million (1.00 cents dividends)
1H 07: $3.06 million (1.50 cents dividends)
2H 07: $4.61 million (1.25 cents dividends)
1H 08: $2.38 million (0.75 cents dividends)
2H 08: $7.24 million (1.55 cents dividends)
1H 09: $12.1 million (1.50 cents dividends)
2H 09: $2.24 million (2.00 cents dividends)
1H 10: $3.63 million (0.75 cents dividends)
2H 10: $6.53 million (2.00 cents dividends)

There seems to be a recovery in the earnings. FY 09 results was 'aided' by a super 1H 09 which accounted for the bulk of its earnings. The trend reversed sharply after that only to recover this year. Whether they can maintain (and even grow) this result going forward is the million dollar question !

(Not Vested)

[dydx]

PTC's main local transport, cargo handling, and warehousing businesses and profitability are capacity-driven and business volume-dependent. In addition, the margins are subject to strong competition from others like CWT. While their prime-name MNC customers are good, they are fussy and tend to switch suppliers of services once-in-awhile. So PTC's profitability will fluctuate in line with the overall market supply/demand, accentuated by occasional loss of major customers.

Apart from its track record of profitability - fluctuating! - and good annual dividends, we have to ask what's the real investment value of a transport-cum-warehouse operator? And we should not forget PTC carries a decent amount of debts.

[cif5000]

PTC's main local transport, cargo handling, and warehousing businesses and profitability are capacity-driven and business volume-dependent. In addition, the margins are subject to strong competition from others like CWT. While their prime-name MNC customers are good, they are fussy and tend to switch suppliers of services once-in-awhile. So PTC's profitability will fluctuate in line with the overall market supply/demand, accentuated by occasional loss of major customers.

Apart from its track record of profitability - fluctuating! - and good annual dividends, we have to ask what's the real investment value of a transport-cum-warehouse operator? And we should not forget PTC carries a decent amount of debts.

PTC has been profitable every year since 1994 (my earliest data). From 2000 to 2009, the revenue trebled almost organically in entirety while trucking "capacity" increased by only 100%. I think this is remarkable because growth is disproportionate to the capacity (and not "capacity driven").

i.e. they are able to get in the sales even though they do not have excess capacity.

Credit should be given to PTC for its ability to maintain an asset-light structure.

The contractors support the business of PTC. They hold the assets and the risk of under-utilization. But of course PTC treats them well. If you plot the contractor cost against profit, you will see a very nice correlation. You will also deduce that PTC is running at 100% capacity. The excess is passed on to the contractors but PTC also profits from that. Volume dependent, absolutely.

I think the important thing to consider is not how much much year-to-year profits fluctuate but how poor a poor year can be. If an investor buys this stock based on a poor year valuation, the rich years will be rewarding.

[Musicwhiz]

The Straits Times
Nov 17, 2011
Shareholder hits out at company's big bash
He feels celebrations were too lavish; firm says it was prudent

By Yasmine Yahya

A major shareholder of Poh Tiong Choon Logistics has complained that the firm's recent 60th anniversary celebrations were too lavish, especially given its recent weak financial results.

However, the firm has said that it was prudent with the costs and that some of its suppliers and supporters contributed towards the expenses.

It had held an anniversary dinner and concert for about 1,000 guests, and contributed $1 million as seed money to set up a Poh Tiong Choon Arts Fund.

The firm had also taken out full-page advertisements in The Straits Times and The Business Times last Friday.

Mr Adrian Ho, who owns a 10 per cent stake, told The Straits Times in an e-mail he felt the splurge was 'rich', given that the firm recently posted a third-quarter net profit of $848,000, down 69 per cent from a year earlier.

Profit for the nine months ending on Sept 30 fell 41 per cent to $3.7 million.

'Being a public-listed company, I would have thought that its board of directors would have been more circumspect about spending and donating such a substantial amount of money for a commemoration,' Mr Ho wrote.

He said this contrasted jarringly with the firm's comments in its financial statement on Monday that it would stay prudent with costs.

Poh Tiong Choon's independent director Hong Hai defended its actions.

The ads were funded partly by Poh Tiong Choon's suppliers and supporters, and therefore cost the company less than what shareholders might expect, he told The Straits Times.

The arts fund is a pledge that will be fulfilled by spreading small donations over many years, he added.

'Taking into account that most of the donations will be tax deductible at the rate of 2.5 times each year's donation, the yearly impact on our net profit is not expected to be large,' he said.

As for the dinner and concert, Dr Hong said: 'That we had over 1,000 guests attests to the warm support we enjoy from customers, suppliers and friends. They are very important to the future of the business. The management was prudent with cost, holding it at the Singapore Expo rather than a five-star hotel, and offering a modest five-course Chinese dinner.'

The president of the Securities Investors Association of Singapore, Mr David Gerald, said companies must be more sensitive.

'Company boards must be prudent in spending on such events, especially when the company's performance is not that impressive,' he said.

'It should be sensitive to shareholders' needs, especially when it decides to splurge on expensive advertisements and other expenses incurred on celebrating its anniversary.'

Mr Ho also noted that in the 60th anniversary advertisements, chief executive Poh Choon Ann had made no mention of shareholders.

Poh Tiong Choon was founded in 1950 by two brothers. Mr Poh Choon Ann took over the business in 1964.

In the last financial year, he got a pay package of between $1 million and $2 million. Four other directors, also from the Poh family, got between $250,000 and $500,000 each.

[email protected]

[D123]

Here are some cumulative figures for FY2000 to FY2010.

Net profits: $62.3M
Net cash flows from operating activities: $130.8M
Net cash flows from investing activities: -$125.6M
Dividends paid out: $35M

Depreciation and amortization of fixed assets: $64.2M
Purchase of fixed assets: -$138.3M

The business does not seem to generate much free cash flow. Shouldn't this be a concern?