Asian Dividend Gems: Teco Electric & Machinery

• Teco Electric & Machinery (1504 TT) is one of the leading companies in Taiwan that specialize in electrical machinery and industrial automation.

• Teco Electric & Machinery provides high dividend payout and solid dividend yield. From 2020 to 2023, the company's dividend payout and dividend yield averaged 72.9% and 4.6%, respectively.

• The company is one of the beneficiaries from the need to upgrade the global energy distribution and storage networks to support the higher usage of AI in the coming years.

Key Investment Merits

• One of the top leaders in electrical machinery and industrial automation in Taiwan - Teco Electric & Machinery (1504 TT) is one of the leading companies in Taiwan that specialize in electrical machinery and industrial automation. The company's core products include low and medium voltage and high efficiency motors that are used in industrial processes, transportation, and building systems and designed to meet global energy saving standards. The company is one of the beneficiaries from the need to upgrade the global energy distribution and storage networks to support the higher usage of AI in the coming years.

• Solid dividends - The company provides a consistently high dividend payouts (70%+) and solid dividend yields (+4%).

• Strong growth in gross profit and EBITDA - From 2020 to 2023, Teco Electric & Machinery's gross profit and EBITDA increased steadily. EBITDA increased by 58% from 5.5 billion TWD in 2020 to 8.7 billion TWD in 2023.

• Reasonable valuations - It is trading at P/E of 19x, P/B of 1.3x, and EV/EBITDA of 8.1x based on 2024 consensus earnings estimates.

• Opportunity for further business focus - The company has diversified businesses. The company is likely to be able to achieve improved profitability by reducing business focus where it does not have enough competitive edge. This is both an opportunity as well as an investment risk.

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