As some may know, I use simple criteria to pick my stock to invest (please read my strategy page). Does it work? I am not too sure. But most importantly, do I follow it closely. Sadly, I really don't. If I did, Saizen should not be in the portfolio. Saizen had some serious problem with its debt and had to stop distribution after just one distribution. Also it raised money by issuing rights and warrants. Why did I buy it?
In its financial statement for Q3 ended 31/03/2010, management said they have started to accumulate cash for distribution, but did not state how much (pg. 15). So I have to make an intelligent guess and sorry to say, mine guess is not intelligent at all.
In FY2008, Saizen's gross revenue was JPY 3,578,346,000 and its distributable income was JPY 1,697,165,000 which is about 47% of revenue (pg. 3 of financial statement ended 30/06/2008). For Q3 ended 31/03/2010, Saizen's gross revenue is JPY 1,025,064,000 (pg. 2) and I assume 47% of revenue which is JPY481,780,080 will be the distributable income since that's the ratio for its first distribution. Then, 90% distributable income is JPY433,602,072 and divide this by total units of Saizen which is 952,932,055 (pg. 11) and you get JPY0.455 for dividend which is about S$0.0071 by using exchange rate of 0.0155. Let's multiply S$0.0071 by 4 which equals to S$0.0284 and divide it by S$0.16 (Saizen share price) which is 0.1775. This means the dividend yield is a whopping 17.8%. How can I not buy!
Now let's look what happen.
Management declare S$0.26 cents for FY2010 (pg. 3 of financial statement ended 30/06/2010) and this is base on the cash accumulated for months of May and June (pg. 2) so S$0.26 multiply by 6 is S$1.56 cents and dividend yield is 9.75% which is way below of my assumption. Saizen FY2010 gross revenue is JPY4,132,792,000 (pg 3) and divide this by 6 is JPY688,798,667 for two months' revenue. And May/June distributable income is JPY161,912,000 (pg. 7) which is only 23.5% of its revenue. I am not sure how this happen. Maybe the finance expenses are now a lot more costly. Also, there is a whole bunch of warrants waiting to be exercised and once exercised, dividend will be less. Did I buy the right stock?
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