CompX International: High Dividend, but Unsustainable

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CompX International: High Dividend, but Unsustainable

CompX International Inc. (CIX)


CompX International Inc. (NYSEAMEX:CIX) ( “ CompX” or “the Company”) was founded in 1993, and is based in Dallas, Texas. CompX International Inc. (NYSEAMEX:CIX) is a subsidiary of NL Industries, Inc. The Company manufactures ergonomic computer support systems, precision ball bearing slides, and locking systems. The Company’s products are used in office furniture, computer-related applications, and a variety of other products. It has a furniture components segment and a marine components segment. The Company sells its products through original equipment manufacturers, value-added re-sellers, and distributors in the United States, Canada, and Taiwan.

Stock Snapshot:

The Company’s stock closed at USD 15.3 as on 9th Oct’2012 with a total market capitalization of USD 189.6 million. Over the last 52 weeks, the stock has traded in a range of USD 9.98 to USD 17.7. The stock has been trading at a P/E ratio of 33.4, a P/S ratio of 1.34 and a P/B ratio of 2.22.

Financial Highlights:

Net Sales:

For 6MFY12, the net sales increased to USD 73.1 million as compared to USD 70 million representing YoY increase of 4%. The major reason for the increase in net sales is the new ergonomic health care product line sales of USD 2.3 million. Also the volumetric demand increased in the Security Products and Marine Products segment mainly due to improvement in economic conditions in North America.

Gross Profit:

For 6MFY12, the Company reported gross profit of USD 119.5 million as compared to USD 18.5 million in the corresponding period last year. The gross profit margin stayed relatively stable during 6MFY12 at 27%, as compared to 26% for the corresponding period last year.

The major factor impacting the gross profit margin during 6MFY12 were lower fixed manufacturing costs in the form of lower depreciation, expenses due to facility condition in 2011, a net positive impact relating to relative changes in currency exchange rates, a net negative impact by higher raw material, and insurance costs.

Operating Income:

For 6MFY12, the operating income decreased to USD 6.8 million as compared to USD 11.9 million for the corresponding period last year. The decrease in operating income is due to the net effects of the litigation settlement gain recorded in the first quarter of 2011 and facility consolidation costs incurred in 2011.

Financial Position:

As of 2QFY12, the Company had total cash balances of USD 5.18 million, resulting in a cash value per share of USD 0.42 per share. The Company had total debt of USD 22.93 million as of 2QFY12, resulting in total debt to equity of 26.85. The book value per share for the Company amounted to USD 6.89 per share.

Factors to Watch Out For:

The stock appears rich on relative basis, however the investors should watch out for the following factors:

* Revenue from new product lines is further expected to augment the sales and operating income growth for the remainder of this year!

* Management has been focusing on identifying new product lines and refreshing their current product lines!

* 5 year average dividend yield of 5.2% with a payout ratio of 109%

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