Demco reports, an update.
I just spoke to DEMCO (3.10) about their yearly 2008 earnings report just released and how year 2009 looks. And so retain my buy view. Here is an update.
Here is the summary as posted in our member-lounge a few days ago. Demco did report revenues as expected of around 2.1 Bill Baht, so that was fine and right in line. The company already paid a 0.225 interim dividend so add 0.04 just announced, and you come to 0.265 so this comes to 40% of their net 2008 profit of 0.65 Baht per share. So that checks out as well, a on the current price this yields 7.5% annually.
The reason for the shortfall in the 4th Q was 20 mill. Baht of extraordinary losses as here explained:
1) An inventory loss of around 10 mill. Baht due to highly fluctuating steel prices during the year, which is understandable.
2) A 12 mill. paper loss through mark to market accounting (which must be booked as a loss even while it has not been sold), on a position in EWC stock wich Demco bought for strategic reason. EWC (8) has a very high book value of 18.5 Baht and produces things which Demco's needs. Demco is by its own bylaws' allowed to invest up to a maximum of 30 mill. in strategically to them valuable companies, related to their business.
I am not too keen on this one, but accept/understand due to high quality and honest management I got to know with Demco over the years. I would take a different view had they speculated on currencies or stocks in industries they know nothing about.
The company re-affirmed to me their 2009 guidance and good prospects for revenues to increase to 2.5 Billion Baht, all remains in place and so does my buy view. This selection, as my others, are somewhat shielded from the global recession due to do Western induced global recession. High dividends, high earnings growth and low debt besides distanced from the world economic fall-out are the attractive drivers.
Paul A. Renaud.
PS. For better understanding and my full research reports on Demco, members can search under the topic "Company Visits". Demco is featured as an example stock here all along, of the sort of growth companies we find here, if you go beyond the large cap stocks or the broker reports.