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Saturday, 19 January 2013

CDW never say die

CDW is showing prove to sceptic like myself that initially it was down but it's certainly not out.

After posting dismal Qtr 1 results (y-o-y revenue -19.1%, pat -124.7%), it bounced back strongly with goods results in both Qtr 2 (y-o-y revenue -6.8%, pat +158.7%) and Qtr 3 (y-o-y revenue +45.9%, pat +191.6%). Unlike year ago results when revenue was flat but this year its revenue showed interesting growth quarter on quarter (Qtr 1 $31m, Qtr 2 $40m, Qtr 3 $62m).

Major contributor on revenue growth in this year is from its biggest business segment - LCD backlight; because of the mass production of a new model of LCD backlight unit for gameset which started in 2Q12.  Be warned however that CDW might not be able to keep up this sterling performance unless the mass production of new models can be started and orders are placed in early current quarter 1Q13 before the existing models are being replaced by new models.

Weak performance in its Office Automation segment whereby its revenue lowered by 22.7%.  It recorded an operating loss of $1.9m in 9M2012 comparing to an operating profit of $1.2m in 9M2011 before any unallocated corporate expenses, interest income and interest expenses.  

For 9M2012, its gross profit margin improved to 23.9%  versus 20.3% year ago because of the margin for new products is normally higher in the beginning but will be subsequently adjusted lower under pricing pressure by customers.  Revenue from one key customer is still quite high at 74% even it has dipped slightly comparing to 78% in 9M2011.  There was a strange $4.731m on Other financial asset in its Sept'12 balance sheet and there is no explaination given for this item.

Interim dividend was quite generous at US$0.005 and looking at its good results in 9M2012 so l can assume it is able to match this rate for its final dividend at US$0.005.  Its share price started its rocket journey on 2 Jan 2013 to reach its dizzying level of 52 weeks high at $0.136 on this friday.  At $0.136 price level and an annual dividends US$0.010 then yield is approximately 9.0%.

9M2012 results was announced on 14 Nov 2012 and full year results will be announced possibly in the week of 28 Feb 2013.  So it is strange that there is such a sudden spike in its share price at the moment.  Volume is building up and is around 5-6 times its normal volume in 2012.  It is possible that traders are eyeing this counter for their speculative play so it is very dangerous to joining them in this game unless an innocent investor knows when to exit; but usually greed is taking over in this feverish rush. At current price level, need to invest (or shall l say, trade) in CDW with both eyes wide open.



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