Thakral Corporation

For the uninitiated, Thakral Corporation is holding an EGM on the 4th of February to seek an approval from its shareholders on a 5cent cash distribution per share. Before anyone jumps in without looking, I would hope to provide a better view for all people who wish to become vested.

About Thakral Corp

As taken from their website.

Listed on the SGX Mainboard since December 1995 with its Distribution business headquartered in Shanghai, the People's Republic of China, Thakral Corporation Ltd is involved in the distribution business of consumer electronics sector, as well as strategic property and equity investments.

The PRC, Hong Kong and India are presently the Group's key markets for its products. The Group distributes an extensive consumer brand portfolio including global consumer electronics brands such as Apple, Asus, Canon, Casio, Fuji, Kodak, Lenovo, Nikon, Nokia, Olympus, Orion, Panasonic, Pentax, Samsung and Sony. Some of the major products distributed under these key brands include digital video cameras, digital still cameras, plasma TVs, desktop and notebook computers, personal digital assistants (PDAs), data projectors, electronic accessories, mobile phones and audio products including MP3/MP4/MP5 players.

In addition, the Group has also successfully created and marketed trendy consumer products such as audio players and accessories, LCD TVs, memory cards, portable DVD players and digital photo frames under its own “YES" brand.

Cash Distribution

Cash distribution occurs when the company has excess cash and has no use for it. In Singapore, as dividends are not taxed, dividends and cash distributions are similar, except that cash distributions are usually associated as a one-time payout.

About the Distribution

Thakral wished to reposition its primary business from consumer electronics distribution to real estate and related infrastructure. In view of the capital distribution announced on 1st Dec 2009, Thakral decided not to go ahead with the repositioning.

With a 5 cents distribution, share capital will be reduced to 72,528k, while EPS for the 9M09 drops to 0.15cents from 0.22cents. Equity is reduced to 92,886k from 223,692k.

Directors and Shareholders

Thakral Investments Limited has a direct interest of 7.44%, while Venture Delta Limited has a direct interest of 34.38%. The Thakral family has a deemed interest of 29.92%, with Jasvinder Singh Thakral has 5,200,000 share options under the employee option scheme. In short, Thakral Investments Limited has direct interest to SGD9.717million of the dividends paid out.

Vested?

I believe that the cash distribution is done without any harm to the company's day to day operations. However, there are 2 concerns that I wish to raise.

1) Thakral has posted a pre tax loss for 3 of the past 5 years. However, FY09 is slated to turn in a profit. My concern is what happens after the cash distribution, considering that they may not pay dividends after. Thakral has not paid out dividends since 2005.
2) The cash distribution is not approved yet, however when it is propsed on the 1st of December, Thakral Corporation moved up 3 cents, before closing at 8.5cents. Would the price drop more than 5 cents once the cash distribution is approved and XD comes around?

I am not vested but I thought I should write an article to inform people who wish to be vested in Thakral.