In an increasingly online environment where one can just flip out a mobile device and start exploring various websites, there is one old school company that still does printing of papers, magazine covers, calendar covers and annual reports as a core business. The company is none other than local-listed Teckwah Industrial Corporation (Teckwah).

Local-listed Teckwah is engaged in the provision of management and financial services. The company’s core segments include Print, Non-print and Services. Teckwah also has an online division engaging in the provision of network services, including online games, and distribution of games software. The Indonesian subsidiary, P.T. Teckwah Paper Products Indonesia is involved in the manufacturing and sales of corrugated boxes in the country.

Financial Performance

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Source: SGX StockFacts and Company’s Financials

In the latest 1Q19, Teckwah’s revenue declined by 8.2 per cent year-over-year (YoY) to $37.4 million, compared to $40.8 million in 1Q18. The Packaging Printing-related business segment contributed $20.3 million, posting a 7.2 percent fall. Meanwhile, the Logistics and Services business declined 9.7 percent to contribute the remaining $17.1 million. Both segments saw poorer performance due to lower demand from customers.

Despite that, there seem to be an upturn in both operating margins and net profit margins since FY18. The higher margins achieved can be attributed to better cost efficiencies.

Debt Leverage and Cash Flow

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Source: SGX StockFacts and Company’s Financials

In the meantime, total cash and cash equivalents balance for Teckwah has been kept relatively constant between FY18 and 1Q19, at around $36 million. However, the leverage levels measured by both total interest-bearing debt-to-total assets, and total interest-bearing debt-to-total shareholders’ equity have been on the rise since FY17. Nonetheless, its current debt level is still not much of a concern given that it is not even over 10 percent of total equity.

Teckwah’s Debt Profile

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Source: SGX StockFacts and Company’s Financials

Breaking down the debt schedule, long-term debt 1Q19 has not shown any substantial increases between FY18 and the latest quarter 1Q19.

On a bright note, cash flows from operations (CFO) in 1Q19 showed a positive CFO of approximately $3.5 million, compared to $1.8 million in 1Q18.

How do Teckwah’s financial ratios compared to peers?

  Teckwah   Tat Seng Packaging A-Smart Holdings 
Price-to-Book Value (P/BV) 0.62 0.65 4.1
Price-to-Sales (P/S) 0.57 0.25 6.2
Dividend Yield (%) 3.7% 5.6% N/A
Dividend Yield (%) – 5 Year Average 4.0% 5.3% N/A
Enterprise Value ($’ million) 62.8 111.8 37.6
Price-to-Cash Flow (P/CF) 5.2 3.0 N/A
Price-to-earnings (P/E) Multiple 13.3 4.6 N/A
Net Debt/(Cash) $’ million (31.8) 27.7 (5.8)

Source: SGX StockFacts (17 May 2019)

We compared Teckwah’s financial ratios against its listed industry peers and the data showed that both Teckwah, and Tat Seng Packaging have comparable valuations in terms of the P/BV and P/S multiples.

Meanwhile, both Teckwah and A-Smart Holdings are in net positive cash balances, Tat Seng Packaging’s net debt levels stood at $27.68 million.

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Source: Shares Investment Website (17 May 2019)

When compared to the industry peers in the manufacturing sector, and the FTSE ST Fledgling benchmarks, Teckwah’s P/E multiple (shown in the red bar charts) appears higher compared to the sector and index benchmark. On the other hand, Teckwah’s P/B multiple is lower.

Threading Cautiously

Teckwah’s overall financial fundamentals look relatively sound. However, we remain cautious of a declining top line that the company is experiencing as witnessed in 1Q19 earnings result. With the ongoing uncertainties over the trade relations between the US and China, there could be continual pullback in demand. China’s operation is a significant contributor, making up almost 30 percent of the company’s revenue.

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