‘In 1966, an investor bought 1,000 shares of Panasonic Manufacturing Malaysia Bhd (PANAMY) with RM 1,000. What is the value of his stockholdings today?’
It is worth RM 792,030 as at 22 August 2018 with the assumptions of:
- He subscribed for an additional 350 shares of PANAMY for another RM 350 in investment in 1975 when PANAMY undertook a rights issue.
- He did not buy or sell shares of PANAMY apart from the 2 transactions stated above. It means, his total capital outlay was RM 1,350 for 1,350 shares of PANAMY.
How did it grow to RM 792,030 in 42 years? During the period, the investor has received an additional 18,034 bonus shares, raising his stockholdings to 19,384 shares of PANAMY. With a current price of RM 40.86 a share, his stockholdings in PANAMY are now worth RM 792,030.
But, that is not his total returns. In that 42-year period, the investor would also receive RM 477,167 in gross cash dividends. Hence, his total returns would be RM 1,269,197 from a capital outlay of RM 1,350, which is a CAGR of 17.7% over a period of 42 years. Impressive!
This is the power of value investing, an art of compounding wealth through the simplicity of accumulating shares of great businesses over the long-term.
Perhaps, you may ask, ‘That was PANAMY in 1966. What about today when the stock is trading at RM 40.86 a share? Is this a good investment?’ Here, I’ll share my findings on PANAMY’s 10-Year Performances, provide an update on its plan to sustain growth, and methods to evaluate its stock deal at the current price.
Therefore, here are 8 things to know about PANAMY before you invest.
#1: Stock Symbol
Ticker Symbol / Stock Symbol: KLSE: PANAMY / KLSE: 3719
Market Capitalization: RM 2.48 billion
Share Price: RM 40.86 (22 August 2018)
#2: The Business
PANAMY manufactures electrical home appliances in two factories: Seksyen 15 (SA1 Plant) and Seksyen 23 (SA2 Plant) in Shah Alam, Selangor D.E. Presently, it has two business segments namely, home appliances and fan products. For the financial year 2018, both segments had maintained their significance in income contribution to PANAMY as:
- Home Appliances
It had contributed RM 614.9 million in revenue and RM 88.93 million in profits before tax (PBT), accounting for 51% & 55% of PANAMY’s group revenue & PBT in 2018.
- Fan Products
It had contributed RM 583.3 million in revenue and RM 74.00 million in PBT, contributed for 49% & 45% of PANAMY’s group revenue & PBT for the financial year 2018.
These products are both marketed domestically and exported abroad. Its main markets are the Asia-Pacific region where Japan is a key destination and as well as the Middle East. For the last 10 years, PANAMY grew its export sales faster than its domestic sales. As a result, its export sales had contributed as much as 62% of PANAMY’s group revenue in 2018, up from 49% in 2009.
Source: Plotted from Figures Obtained from PANAMY’s Annual Reports
PANAMY has reported consistent growth in revenue and profits for the last 10 years. Revenue had doubled from RM 600.9 million in 2009 to RM 1.20 billion in 2018. This is contributed by sales growth of its products locally and abroad. This led to higher shareholders’ earnings from RM 49.8 million in 2009 to RM 131.0 million in 2018.
PANAMY has achieved 10-Year Return on Equity (ROE) Average of 12.82% from 2009 to 2018. This means, in that period, PANAMY has generated, on average, RM 12.82 in annual earnings from every RM 100.00 in shareholders’ equity.
Source: Annual Reports of PANAMY
Source: Annual Reports of PANAMY
#4: Balance Sheet Strength
PANAMY is a cash-cow. It has generated RM 891.7 million in cash flows from its operating activities over the last 10 years. In addition, it had received RM 232.2 million in dividend and interest income during the period. From which, it spent a total of RM 291.9 million in capital expenditures from 2009 to 2018. Hence, it has generated RM 832.0 million in free cash flows – cash which PANAMY is free to utilize it as it wishes to. So, what did it do?
PANAMY chose to pay most of them in dividends as it paid RM 647.4 million in dividends to reward its shareholders. The company had kept the remaining RM 184.0 million in its bank accounts, expanding PANAMY’s cash reserves from RM 466.6 million in 2009 to RM 650.6 million in 2018. PANAMY has zero long-term borrowings over the last 10 years.
Thus, PANAMY is a cash generating machine by itself and does not need to rely on raising equity or debt to finance its operations, expansionary activities or to reward its shareholders with dividends.
Source: Annual Reports of PANAMY
#5: Future Prospects
Presently, PANAMY is building a new office building at SA1 Plant and expects it to be completed in the financial year 2019. Upon its completion, the current office spaces can be made available for production activities, thus, expanding its area of production by 18% at SA1 Plant.
PANAMY is also planning to construct another building at SA2 Plant. It expects to complete this project by 2020.
In 2018, PANAMY has recorded RM 2.16 in earnings per share (EPS). Therefore, its current P/E Ratio is 18.92, higher than its 10-Year P/E Ratio average of 15.54 presently.
In 2018, PANAMY has recorded RM 14.52 in net assets a share. Thus, based on its stock price of RM 40.86 a share, its current P/B Ratio works out to be 2.814, higher than its 10-Year P/B Ratio average of 1.977.
In 2018, PANAMY has declared RM 1.48 in ordinary dividends per share. Thus, its dividend yields are 3.62%. If I include its special dividend of RM 1.00, then, its dividend yields is 6.07%.
#7: Investors Relation
For shareholders’ enquiries, you may contact:
Ms. Rohani Abdul Rahim
Phone: +603 5891 5207
#8: Major Shareholders
As at 29 June 2018, PANAMY’s major shareholders and their shareholdings are as followed:
– Panasonic Management Malaysia Sdn Bhd: 47.45%
– Employees Provident Fund Bhd: 9.75%
– BPSS Lux for Aberdeen Global – Asian Smaller Companies Fund: 2.61%
– Public Regular Savings Fund: 2.25%
– Chinchoo Investment Sdn Berhad: 2.07%
PANAMY is a cash generating machine with consistent growth in earnings and high levels of dividend payouts over the last 10 years. Its balance sheet is solid with RM 650.6 million in cash reserves and zero gearing ratio. This enables the manufacturer to continue its trend of steady dividend payments in the future.
With solid fundamentals, the question now lies in its stock price. From a value investor’s viewpoint, it is ideal to accumulate shares of good companies when their valuation is attractive. Thus, you may ask, whether or not, you find these
Valuation figures on PANAMY attractive:
- P/E Ratio of 18.92
- P/B Ratio of 1.977
- Dividend Yield of 3.62% (excluding special dividend)
If you are undecided, please do some soul searching or keep shopping for more attractive deals in the stock market. It is best not to commit into an investment if you are unsure about it. Keep Hunting!