Panasonic Manufaturing Msia Bhd

THOUGH hardly regarded as an exciting stock, Panamy (Fundamental: 2.8/3, Valuation: 1.7/3) has, nevertheless, performed very well. Since our first feature, on Dec 5, 2014, its share price has gained 27.8% to the current RM23.50 — far outperforming the FBM KLCI, which is up just 6.2% over the same period. Panamy is one of InsiderAsia’s top 10 picks for 2015.

The stock will likely continue to do well, particularly in times of market uncertainties.

The Panasonic brand is a market leader in a wide range of electrical appliances. Topline sales grew at a steady compounded rate of 7.2% annually from FYMar2010-FY2014 while net margin was steady around 8.3-10.6%. What this means is that the company generates fairly stable cashflow from operations annually — which, in turn, is supportive of a high dividend payout ratio. From FY2010-FY2013, dividend payout ratio ranged from 80% to 114%.

As such, it raised a few eyebrows when dividends dipped sharply in FY2014. Total dividends came up to just 69.25 sen per share — about 52% of net profit — considerably less than the RM1.41 per share in FY2013.

Barring some fresh acquisitions in the works, we believe a probable reason is the weakening yen around September 2014, when the company declared its final dividend. (It would be more beneficial for its parent company to repatriate dividends when the yen is weak) The yen fell from 32 to the ringgit in early August to more than 35 by end-November.

As a result of the lower payout, cash has risen — to RM520 million at end-2014, compared with RM500 million a year earlier.

Now that the yen appears to have stabilised, there’s a good chance payout ratio will be much higher this coming September. Assuming an 85% payout for FY2015, dividends are estimated to total RM1.30 per share, giving a higher than market average yield of 5.5%.

This article first appeared in The Edge Financial Daily, on April 21, 2015.