Sunday, May 01, 2011

TDM Good For Long-term Hold

It came like a bolt from the blue when TDM announced a single-tier first interim dividend of 3 sen for the financial year ended 31 Dec 2011. This together with the single-tier first and final dividend of 13.5 sen for the year 2010 means that for every 1000 shares you will get RM165 which is payable on the June 09, 2011. The x-date for the dividends is May 25, 2011. At RM3 per share, the dividend-yield works out to 5.5%. Considering that the interest rate of fixed deposits at banks is at 2.75% p.a. it is worthwhile to buy TDM now.

As reported in the just released annual report for TDM, the company has cash of RM176.7 million and almost zero gearing. The company is well managed with a strong balance sheet and good earnings per share of 41.49 sen for the year ended 31.12.2010.

The management of the group is confident that its business will continue to do well. It has a piece of very good land measuring 25,000 ha in East Kalimantan. I understand that 5000 ha have been planted with oil palm in 2007 and the remaining land is scheduled for planting of oil palm within the next 3 years. This ensure that the company will have good growth in the foreseeable future.

On its healthcare division, TDM has acquired TDMC Hospital Sdn. Bhd, a 128-bed hospital in Taman Desa. This acquisition is expected to contribute positively to the group in the coming years. This sector has already been doing well, and with the new hospital, more profit is expected to come in.

The food division of the group is the sore spot. It has not been doing well over the years. For 2010, the division still shows some losses. Management has the intention to dispose off the sector when someone suitable to take over comes along.

Action to take: Continue to hold on to your TDM or buy more for long-term hold.