22 August 2013

Sim Lian - Family Controlled Counter Listed in Singapore - Aug 2013

Summary of Financial Performance:

Equity Attributable to Equity Holders of The Company (in $million) rises from 80.2 in year 2005 to 704.7 in year 2012, or compound annual return rate of 31.2%.

If you do not understand what Equity Attributable to Equity Holders means for, it means Shareholders Fund. There are two methods for a company to grow the Shareholders Fund: through private placement & new shares issuance; through retaining the net profits earned.

Sometime, we can use Price / Book ratio to determine whether the share price is undervalued or overvalued. However, if we look for long term growth, PB ratio of above 1.0 is still acceptable, unless the counter requires little capital to operate while relying largely on the debts (for instance Starhub).

Reasons:

  • Transformation stage - from pure construction play to be involved in higher net profit margin property development
  • "Good luck" to enjoy the rising trend in Singapore property market as a whole, as Singapore continue to attract more talents to work in Singapore and has a flexible policy to invest/own a private property here


Chart:


The price moved from around $0.058 end of year 2005 to S$0.76 end of year 2012, which is about  37.8% average compound annual return rate.

So if you look for a very long term investment, the shares price normally will move along with the book value of the shareholders. It can be lower or higher than the pace of increasing of book value.

Nonetheless, from chart above, I realized that there was up (beginning of year 2006 & October 2010) and down (end of year 2008 - beginning of year 2009 - Financial Crisis) . If we can fully utilize it, maybe we can have a chance to earn more from that. Nonetheless, the principle of long term investment is to always look for a good counter that can increase in book value faster than the peers while maintaining cautious risk management in both business & corporate finance prospect.

Most importantly, do more homework on finding out the strategies and future plan of a company to sustain its growth while looking for better opportunities in increasing its revenue & profit margin.


P/S: Above paragraphs not stand as recommendation to buy / sell / hold counter. Please consult your financial adviser for more information before making any investing decision.

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