Sinmag Equipment: “The Middleby (MIDD) of Asia”

Koon Boon Kee presented his in-depth investment thesis on Sinmag Equipment (Taiwan: 1580) at Asian Investing Summit 2014.

Sinmag Equipment: “The Middleby (MIDD) of Asia”, Taiwanese-listed Sinmag has a dominant share in bakery equipment and other food service equipment in Asia (in China: 80%+ share in hypermarkets, 50% in chain outlets, 30% in 4- to 5-star hotels; in Taiwan: an overall 30% share). Yet, no customer accounts for more than 5% of revenue. The founders of this family business have demonstrated clear dedication in building up the company with its wide-moat business model backed by a strong distribution/marketing network. Sinmag is currently trading at an attractive mid-teens trailing P/E (EV/EBIT: ~10x) with opportunities to compound capital at attractive rates given the long runway of growth, including further consolidation opportunities across Asia. Based on PE, P/CFO and EV/EBIT, the shares are trading at a 40-50% discount to Western-listed comparables despite more efficient use of assets in generating profits and cash flow. The 4% dividend yield is supported by strong cash flow generation, a net cash balance sheet and a steady revenue stream.

About the instructor:

KB Kee is the founder and managing director of the Singapore-based Bamboo Innovator Institute to establish the thought leadership of resilient value creators around the world. KB has been rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets. He was a fund manager and head of research/analyst at Aegis Portfolio Managers, a Singapore-based investment management organization dedicated to the craft of value investing in Asia. He had been with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-old flagship fund. He was previously the portfolio manager for Asia-Pacific equities at Mirae Asset Global Investments, Korea’s largest mutual fund company. He received his Masters in Finance (magna cum laude) and double degree in Accountancy and Business Management (both summa cum laude) from the Singapore Management University (SMU). He had taught accounting at his alma mater in SMU and published research in the Special Issue of Istanbul Stock Exchange 25th Year Anniversary of the Boğaziçi Journal, Review of Social and Economic Studies, as well as wrote articles about value investing and corporate governance in the media.

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