Last year was not an uneventful year for Ming Fai. The company sold its investment property and subsequently attracted some attention from David Webb, an activist investor who pressured the company to pay out the proceeds of the sale as a large dividend. Ming Fai listened just a little bit, and paid a special dividend of HK$0.20/share during the year in addition to its regular dividend payments. While this was a nice development the company continues to hold a net cash balance of HK$0.68/share while shares trade at HK$1.06.
The results of Ming Fai itself during the year were not spectacular. The main amenity segment continued to perform well with revenue increasing 0.25% while earnings before tax increased by 16.1%. Unfortunately the solid performance of the main business continues to be obscured by the loss making retail segment that saw losses grow from HK$27.1 million to HK$37.5 million (a part of these losses are shared with outside minority shareholders). While this is not a great result, I think Ming Fai continues to do the right things to address the problem. The number of stores they operate dropped once again, from 543 to 387, and the company is also cutting overhead and other expenses in the retail segment.
While Ming Fai is cheap no matter how you slice it, my thesis hings for a part on the company being rational and not keeping a loss making segment around forever. They either turn it around, or liquidate it completely. If you ignore the loss making retail segment for a second, and only value the amenity business and the excess cash you can see how much upside potential there still is:
Author is long Ming Fai