Thursday, March 16, 2006

Spinning the disc

Magnecomp International is listed on the Singapore Exchange in 1998 [today's close: S$1.37]. Its business consists of two major divisions: (a) Magnecomp Precision Technology (MPT) and (b) Mansfield Manufacturing Company (MSF).

Interestingly, MPT - the hard disk division of Magnecomp, is also listed on the Stock Exchange of Thailand. It last traded at about THB4.70 per share. Hence, Magnecomp's 74% stake in MPT is valued by the market to be about S$302 million. As Magnecomp's own market capitalisation on the Singapore Exchange is S$312 million, Mr. Market effectively prices MSF at S$10 million.

The perculiar thing is that MSF, alone as a division, is profitable through its provision of metal stamping and tooling services. Given that MSF may generate net earnings of about S$10 million, this segment of Magnecomp is only priced at an attractive P/E of 1x. Is Mr. Market's pricing accurate or was he confused by his Thai counterpart?

Other vital ratios of Magnecomp [approximate historical ratios]:
  • P/E: 11
  • P/B: 1.5
  • ROE: 16
  • ROA: 9
  • Debt/Equity: 0.3



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