TECNIC - Dividend Investment

TECNIC recently came to my attention after announcing a minimum 50% dividend policy FYE2010 onwards. They started the ball rolling FYE2009 when they announced 16 sens TE dividends out of their 31.7 sens EPS. The dividend was announced in Feb with their quarterly report and the share shot up from RM1.90 to Rm2.++. The only other occasion they announced dividends was FYE2008 when they declared 3 sens.

TECNIC is a injection & blow molding company previously known as STS TECNIC. Since 2005, they have been profitable but has only started some form of dividend payment from 2008 onwards.

Growth since 2005 has been impressive with the management successfully turning around a loss-making company to a growing profitable one. Debt levels has also been reduced to a point where their cash is double of their long and short term debts combined. Last reported NTA is RM1.74.

EPS Growth;

2005 = 136.75% from a negative EPS of -24.16 to positive 8.88 sens
2006 = 47.74% to 13.12 sens
2007 = 9.00% to 14.31 sens
2008 = 49.05% to 21.33 sens + declared 3 sens dividend
2009 = 48.80% to 31.74 sens + declared 16 sens dividend


Prospects

Being a small cap company, it's possible this counter has been overlooked but it cannot be ignored anymore since their announcement of the dividend policy. Their company grew even in the midst of the financial meltdown and global recession and with the announcement of a dividend that gave a yield of 8.4% at that time. By establishing a minimum 50% dividend policy, investors will soon find a place in their shareholders list as it is still considerably cheap in terms of yield.

Where normally anything above 8% dividend yield will see the stock appreciate until the yield drops near or below 6%. Including the fact that for the past 4 years, their EPS growth is phenomenal with low gearing. At current price of RM2.14 after being sold down in the past few days and using FYE 2009 EPS of 31.74, PER currently stands near 6.7x.

Assuming there was no further growth FYE2010, at current price range of RM2.14 dividend yield would be about 7.5%. It is unknown since the announcement whether TECNIC will be paying dividends in one big sum or in batches although so far on the 2 dividends they did, it was all in one go.

Compared to their peers, TECNIC is offering one of the highest dividend yield in the industry at the moment with one of the lowest PER. EPS is also growing, cash in the bank is about RM10 mil with total debts amounting to only about RM5 mil.