Posted by kcchongnz > May 18, 2013 05:40 AM

Does Success Transformer satisfies the 5 yardsticks of Cold Eye? 
The table below details the 5 metrics of Success compared with the yardsticks: 

1 ROE 14.3% <15% 
Net profit 32243
Equity 225255

2 Cash flows Bad 
CFFO 11043 CFFO/NP<100% 
FCF -10698 Negative 

3 PE ratio 5.3 <10 
Price 1.25
EPS 0.235

4 Dividend yield, % 2.4 <3% 
Dividend , sen 3.0

5 Price/NTA 0.82 <1 
NTA 1.53

Though success Transformer is successful as an investment in terms of PE ratio (<10), and NTA (P/NTA<1), it is mediocre in ROE (<15%) and dividend yield (<3%). It is particularly poor in cash flows, which to me is the more important metric. Cash flows from operations in 2012 of 11m is just a third of net income. Its free cash flow is not good at all with a negative value because of the need of capital expenses of 21.7m. In fact, Success has no free cash flows for the last three years. Hence it requires continue to borrow money to do its business. This is evident from its borrowing increasing from 15 m in 2009 to 83 m in 2012. 

So do you want to invest (emphasis, invest, not speculate) in Success?