Disclaimer

BigFatPurse Pte Ltd (the Company) is not licensed to provide investment advisory.

The Information provided in this report is for the purpose of illustrating an investment

valuation technique used by the Company. The Information is not intended to be and

does not constitute financial advice. It is general in nature and not specific to you.

The information is written based on the opinion of the writer. Financial figures and data

were obtained from the official financial report available to the public.

The writer does NOT guarantee any returns from the purchase of the discussed stock.

Readers should seek the advice of a qualified and registered securities professional or

do their own research and due diligence. You are responsible for your own investment

research and investment decisions.

In no event will the Company be liable for any damages. Under no circumstances will

the Company be liable for any loss or damage caused by a readers reliance on the

Information in this report.

The writer owns the discussed stock at the point of writing.

Updates

Due to the recent stock consolidation that has took place in SGX, there have been

changes to the stock price of the discussed stock. Changes have been indicated in red

in the following report.

All other values, figures and calculation remains unchanged.

Powermatic Data (SGX:P12)(SGX:BCY)

Prepared by: Alvin Chow of BigFatPurse

This is an example of a fundamentally strong stock that is undervalued. There are many ways to value a stock but we will focus on using the Conservative Net Asset Value (CNAV) strategy for this discussion.

Summary

The CNAV for Powermatic Data (PM Data) is $0.22 ($1.12 after consolidation) while the stock is trading around $0.19 ($0.90 during time of update). This presented a CNAV discount of 14%. You can refer to Appendix A for the calculation of the value and discount.

40%

40%

15%

3% 2%

Breakdown of PM Data Assets

Cash Properties Investments Inventories Receivables

This asset value is backed by cash and properties, whereby each constituted 40% of the total assets. Buying the stock of PM Data is equivalent of buying the cash and properties for below their value. With a POF score of 2 out of a possible 3, this stock presents a value stock with healthy cash flow and low gearing. It is likely that the asset value of this stock can maintain. Refer to Appendix B for the calculation of POF Score. At a Net Asset Value per share of $0.25 ($1.25 after consolidation) and a buy price of $0.19 ($0.90 at time of update), the potential gain could be 32% (39% at time of update). Whilst waiting for the capital gain to be realized, the stock has been distributing $0.01 dividends consecutively in the past eight years. This is one of the rare stocks which provide capital gain opportunity and cash flow to the investors in the form of annual dividends.

If the Stock Is So Good, Why Is It Undiscovered? Most analysts cover big companies due to the fund size. It is difficult to invest in small companies with huge capital because the funds would end up employing more analysts to cover more companies to buy, or end up taking the small companies private. The second reason is that most investors are focused on high earnings. These small companies do not have impressive earnings but they make enough to edge out decent profits. However, the investment world loves to focus on the few stocks with highest earnings and resulting in these smaller companies being neglected. Lets run through some of the assessments of PM Data.

Debt-Free

Looking at the balance sheet, the company has S$18.7m worth of cash while the total liabilities are S$3.6m. The company is essentially debt free as they have the ability to pay back all the liabilities without the need to drain out the cash. There have been speculations about interest rate hike in the near future. Assuming this is true, PM Data would not be hurt by high interest rates with such low liabilities.

Property Quoted At Cost Besides the large cash pile, the company has an investment property with a value of $18m carried in the balance sheet. Looking at Note 14 or Pg 64, we would know this value of S$18.6m was quoted at cost after depreciation. The fair value is actually S$35m. This means the CNAV discount can go as high as 40%, and potential gain could go up to 67% if the investor bought the stock at $0.19 ($0.90 during time of update) and sold at the higher NAV of $0.35 ($1.75 after consolidation).

Cash: $18.7M

Total Liabilities: $3.6M

This is an industrial property located at 7 & 9 Harrison Road S369650/1, near Tai Seng MRT. See the map and pictures below, taken from Google Maps and Street View.

Management's Interests Dr Chen Mun, the CEO, owns 56 percent stake based on Pg 90 of the 2014 Annual Report: His interest would be more aligned with shareholders than many other companies where the management's reward is mainly from salary and has little or no stake in the well-being of the company. Besides the sizeable stake, Dr Chen Mun is the founder of the company. There is an intangible sentimental value in the company for him. Hence, it is unlikely he would do harm to PM Data.

Consistent High Dividend Yield The flip side of the management's sizeable ownership of the company is that he may vote many decisions in favour of him and against the rest of the shareholders. One of the common concerns is that the management pay themselves high salary and short change on the dividend distribution.

Source: Yahoo Finance

This is not a case for PM Data as the company has been giving out $0.01 per share dividend ($0.05 after consolidation) for consecutive past 8 years. Based on a price of $0.19 ($0.90 during time of update), the dividend yield is about 5 percent, which is very comparable, or even higher, than some of the blue chip companies.

Corporate Actions PM Data had commenced the share buy-back program since Feb 2015 and had purchased 776,000 shares as at 8 Apr 2015, worth approximately $140,000. This is a good sign as the company is buying the shares at undervalued prices, creating extra value for existing shareholders. Recently, the company proposed a 1 for 5 share consolidation in response to the newly implemented SGXs Minimum Trading Price (MTP) of $0.20. This exercise is not going to change the value of the company.

Appendix A Calculating CNAV

Calculating the Assets A Summary of the Key Numbers

Why these Key Figures matter?

We will always begin with the Balance Sheet, or also known as Statements of Financial Position. You can find this on Pg 34 of the 2014 Annual Report.

Plant and Equipment S$436,500

Trade and Other Receivables S$446,500

Investment Property S$18,608,000

Other Financial Assets S$3,338,500

Inventories S$772,500

Cash and Cash Equivalent

S$18,749,000

Conservative Value of the Assets = S$42,352,000

Plant and Equipment = 50% of S$873,000 = S$436,500 (Their equipment consists mainly furniture which are not as valuable as cash and properties.) Investment Property = 100% of S$18,608,000 Intangible Assets = S$0 (because club membership and certification fee do not directly contribute to profits and may not be transferable.) Other Financial Assets = 50% of S$6,142,000 = S$3,071,000 (mainly consists of stocks, funds, and bonds investments which could fluctuate in value.) Inventories = 50% of S$1,545,000 = S$772,500(discount for unsold inventories, or the company have to slash prices to sell off remaining units.) Trade and Other Receivables = 50% of S$893,000 = S$446,500 (in case some of these receivables could not be collected.) Other Financial Assets, Current = 50% of S$535,000 = S$267,500 (shares and bonds)

Other Assets = S$0 (these are deposits made to secure services. Deposits may not be refunded in the event that the contract was terminated.) Cash and Cash Equivalent = S$18,749,000 Summing up the Conservative Value of the Assets = S$42,352,000

Calculating the Liabilities Next, we look at the total liabilities of the company. The figures are also reflected in the Balance Sheet.

PM Data only have current liabilities, which means essentially the total liabilities are equivalent to the current liabilities of S$3,646,000. It is also important to note that there are no Non-controlling Interests and no preference shares in the company and hence, the Net Asset Value need not be adjusted to exclude these figures.

Finding the number of shares We refer to Note 23 or Pg 74 of the 2014 Annual Report.

PM Data has 173,339,000 shares outstanding.

Calculating CNAV per share CNAV / share = ( Conservative Assets Total Liabilities ) / (number of shares) = (42,352,000 3,646,000 ) / (173,339,000) = $0.22 Update Calculation CNAV / share = ( Conservative Assets Total Liabilities ) / (number of shares) = (42,352,000 3,646,000 ) / (34,667,800) = $1.12

Determine CNAV discount 1 ( Stock Price / CNAV ) = 1 (0.19 / 0.22) = 14% [Assuming stock price at S$0.19] Update Calculation 1 ( Stock Price / CNAV ) = 1 (0.90 / 1.12) = 20% [Assuming stock price at S$0.90]

Appendix B Calculating POF

Calculating the Price-to-Earnings Ratio We will look for the earnings in the Income Statement on Pg 33

The earnings-per-share is S$0.0117. Given the stock price at S$0.19 ($0.90 during time of update) PE Ratio = ( Stock Price ) / ( Earnings Per Share ) = 0.19 / 0.0117 = 16 [Update Calculation] 0.90 / 0.0117 = 77 We will accord 1 point if the PE ranges between 0 and 15. In this case there is no point for PM Data.

Analysing the Operating Cash Flow Refer to Pg 37 for the Cash Flow Statement.

Source: Powermatic Annual Reports 2012 and 2014

In year 2014 it was positive operating cash flow but negative in 2013. We need to refer to the 2012 Annual Report for the 2012 operating cash flow. PM Datas 2012 cash flow is also positive and we give one point if at least two of the past three years operating cash flow were positive.

Calculating the Debt-to-Equity Instead of breaking down the total liabilities into debt and non-debt items, we can simply take the figure of total liabilities. This is a convenient way and more conservative. Equity is equivalent to Net Asset Value which is Total Assets Total Liabilities. Debt-to-Equity (DOE) = 3,646,000 / (47,680,000 3,646,000) = 8% We will give one point if the DOE is less than 100%. PM Data receives 1 point with a DOE of 8%.

- End of Analysis -

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The Stock Analysis done in this report is based on the proprietary

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