Taking a look at Tai Sin Electric

Tai Sin Electric (TSE) had not been performing well since 2016. The recent quarter result does not look good as well. TSE has the following segments:

1. Cable & Wire (C&W). Includes cable and wire manufacturing and dealing in such products.
2.  Electrical Material Distribution(EMD). Includes distribution of electrical products.
3. Test & Inspection(T&I). Includes laboratories for tests, experiments and researches and provision of quality consultancy services.
4. Switchboard(SB). Includes manufacturing and dealing in electrical switchboards, feeders pillars and components. (Purely Brunei only)

Business Performance

TSE had grow its equity attributable to the owners of the company over the past 10 years. The revenue appears to be cyclical and stagnant for recent years, ROE is coming down, show that it is not as profitable as it used to. Net margin as been staying near 6% and above, however TTM show margin dropping below 5% and ROE breaking down below 10%. The best margin came from C&W and T&I segment. 

Growth

TSE is trying to grow its business regionally such as Malaysia, Vietnam, Indonesia, Cambodia, Myanmar, Thailand and the Philippines. They are also expanding the capabilities of its T&I business with the latest M&A of ASTAR Labotory PTE LTD.

Business Risk

The business depend heavily on Singapore market, its other growing market is Malaysia and Vietnam. Hence, TSE is greatly affected by the economy and construction/Infrastructue sector in Singapore and copper price.The construction sector in Singapore isn't doing well and copper price has been rising, eating into profits. 

Growth in other geography segment has been slow over the years, some countries revenue are actually in decline in Indonesia and Brunei.

Dividends

With the amount of cash and FCF generated, TSE should able to remain it current dividend of 23.5 cents which is a payout of about 10.3 million. Current cash holding of about 20 million.

Conclusion

Now is tough times for TSE, just like during GFC and it's more than 35 years of operations, it should able to tie through this period but dividend may be affected if things get worst. TSE has a low debt hence has low risk of going bust. I do not see this as a growth counter, reason that there is better growth stock out there. Keeping it as an income stock is definitely getting less appealing and market do not like uncertainties. 

The sector will probably be hit during a recession and dividend will drop. For a more stable income, reits and blue chip such as ST ENG is more suitable.

Personally I do not like its dropping ROE.

Divested