Nam Lee Pressed Metal Industries (Nam Lee) is mainboard-listed company engaged in the supply and installation of steel and aluminium products, such as gates, door frames, staircase nosing and hand-railings, laundry racks, sliding windows and doors for flats and houses, and the supply of aluminium mainframes for container refrigeration units.

The company, a thinly traded counter, has a market capitalisation of $87.3 million. This is despite the fact that it seems to possess strong fundamentals and attractive valuation. However, Nam Lee is also in a highly competitive industry and hence is susceptible to the global economic environment. We dig deeper to find out more about the company.

Revenue And Margins

revenue

Company’s Financials

In FY18, Nam Lee saw an uptick in revenue as it climbed 10.5 percent to $156.8 million, from $141.9 million in FY17. However, in the latest 1H19 revenue declined again. This time, revenue tumbled by 23 percent from $85.8 million in 1H18 to $66 million in 1H19.

Meanwhile, both operating and net income (excluding extraordinary items) margins have also fallen, with the latter seeing the steepest fall. However, Nam Lee is trying to prop up its bottom line by keeping costs in check and total operating costs has also been declining throughout the past few years. Again in 1H19, total operating costs fell by 4.1 percent to $8 million.

Cash And Debt Position

For the past few years, it can be seen that Nam Lee is rather prudent with taking loans as debt levels have always been conservative. In fact, since FY16, Nam Lee has gradually been paring down debts. As of the latest 1H19, loans and borrowings are insignificant at $1.3 million.

On the other hand, Nam Lee’s total cash and cash equivalents balance has mostly been kept in the range of $40 to $45 million. In 1H19, Nam Lee held cash of $40.1 million, translating to a net cash position of $38.8 million.

Peer Comparison

Nam Lee TTJ Yongnam Holdings
Price/Book Value (P/BV) 0.61 0.70 0.36
Price/Sales (P/S) 0.63 1.1 0.56
Dividend Yield (%) 4.2% 2.5% N/A
Dividend Yield (%) – Five-Year Average 3.7% 6.6% N/A
Enterprise Value ($’ million) 43.9 43.6 213.600
Price/Cash Flows (P/CF) 6.6 11.3 N/A
Price-Earnings Multiples (P/E) 9.0 15.0 N/A
Net Debt ($’ million) (38.8) (51.5) 170.3

Source: SGX StockFacts

We noted that both Nam Lee and TTJ are comparable in terms of the price-to-book value (P/BV), and enterprise value (EV). Both firms are also in net cash positions.

In terms of current indicative dividend yield, Nam Lee is higher than TTJ. However, on a five-year historical period, TTJ yield is significantly higher at 6.6 percent compared to Nam Lee at 3.7 percent.

Moreover, at the last traded price of $0.36, the stock price is also stable, although due to the fact that it is also a thinly-traded counter. Nonetheless, it also means that the counter provides yield stability to investors. Nam Lee’s average three-month daily trading volume is approximately 1.1 million shares.

Is Nam Lee A Potential Gem?

While Nam Lee’s valuations are relatively low as compared to its peers and the industry, its business is highly susceptible to the various phases of the economic cycles. For example, one might note that the drop of 23 percent in 1H19’s revenue to $66 million coincided with slower growth outlook.

That said, the local construction industry is set to benefit from the various public and private construction contracts. Some mega projects include the integrated resorts (IR) expansion plan. Potentially, Nam Lee may be one of the beneficiaries to some of the contracts relating to such projects.

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