(Stocks Discussion) SGX: Fu Yu (SGX: F13)?

Fu Yu is a good company with strong cashflow generated. It is a plastic molding company. In recent time, the company has maintained its debt free status while paying divdends on a high payout ratio. One of the reason is because the company did a disposal of assets in 2013-2014 and did not give out much special div. They retained some of the cash and has been paying it out slowly. Personally, i feel their dividends will eventually reduce a little but still maintain in the region of 1 cents.

This is because of a stable and positive operating cashflow generated due to its plastic molding business. Its fellow competitor is Sunningdale Technology.

I've taken a closer look at Fu Yu and here's my opinion on it!

Their dividend yield is pretty decent, a 6% dividend yield. However, what we have to look closer into is the payout ratio which is 104%.

Payout ratio = dividends paid / earnings

From this, we can understand that their dividend paid is more than their earnings. Industrially as a "dividend-trap".

Their free cash flow is positive however it is extremely unstable as some years a much higher than the other, similar to their revenue growth YOY.

Looking at their key revenue drivers, they have factories in China, Singapore, and Malaysia. Having most of the factories in China, their EBITDA for China (6.1mil) much lower than that of Singapore (16.2mil) and Malaysia (8.5mil), which is odd to me.

From what I understand, they are not investing in R&D and plans to create a strong competitive edge is unclear. From this, I don't really feel extremely confident in their outlook.

Thus due to its high payout ratio as well as the uncertainty of the future of the company, personally I would not invest. However, do let me know what you think!