27 November 2013

My View on Shares Market - November 2013

We had seen a record year for US Market and Malaysia Market this year but not Singapore. Part of the reasons why were due to the changes of Singapore government policy on tightening up labor inflow as well as cooling measurement in property market. The changes has resulted in higher inflation environment and the government decided to allow slightly stronger S$ in attempt to battle with the increasing environment. 

As a result of increased rental & labor cost recently, I did realize that most of the companies in service industry were not doing really well, as we still see those in the retail industry suffered from a lower profit margin and higher overhead expenses. 

For property development wise, we saw a softer market condition with lesser new launches in private property market in-spite the fact that the government is pushing hard for more HDB BTO units for the first timers to subscribe. Nonetheless, I believe it is a good sign for long run as the developers may not suffer from "Sudden Jump" in property sales if anything goes wrong. I will treat is as a soft landing for the market to digest the oversupplied items in the market. I also have seen more developers switched their focus on oversea markets. 

For plantation sector, I believe there is a slow recovery in ASP as economy moves on. Nonetheless, I believe the increase in price is not as significant as previous. First Resources remains my top pick, but it is now at a higher price range. I still look good on Wilmar longer term as the crushing & palm oil business may recover from losses in long run. 


25 November 2013

Thai Beverages 9M2013 Result - Net Profit Dropped 50% Amid Revenue Slide 7%

Follow up from previous quarter result update, let me summarize the 9M2013 Result of Thai Beverages here (extracted from Thai Beverages 9M2013 Quarterly Report)

Income Statement
Balance Sheet - Part 1 (Assets)


Balance Sheet - Liabilities

Breakdown of 2013Q3 Report

The overall economy in the third quarter of 2013 indicated the sign of slowdown from the previous
quarter with respect to both private sector consumption and investment which made the manufacturing
recovery in the industrial sector still precarious. Nevertheless, exports of some products showed signs
of recovery in line with the foreign demand, such as agricultural, electronics, and automotive products.
The tourism sector has expanded robustly as a result of the high growth of tourists. Fiscal spending
accelerated for economic boost but remained below target.

ThaiBev business has been impacted by the new excise tax that was effective since 4 September 2013. 
The excise tax calculation methodology for alcohol beverage was previously imposed by either value 
of ex-factory price or volume of pure alcohol, whichever was higher. Now it is based on both value 
and alcohol content. Therefore, price of all alcohol products will be adjusted differently in accordance 
with the product types.

Overall Business 
In September 2013, the Company completed the fair value assessment of the identifiable net assets of F&N from the acquisition to comply with the accounting standards. The Company’s financial statements have been revised to present gain from purchase of investment, amounting to Baht 12,688 million, in the third quarter of 2012 when the acquisition was made. However, for the full year 2012 financial statements, there would be no impacts from this fair value assessment. 

For the third quarter of 2013, ThaiBev’s total sales revenue decreased 6.8% from previous year to Baht 35,041 million. Net profit for the period was Baht 4,030 million or 74.5% decrease due to a drop of net profit from F&N results caused by the revision of gain from purchase of investment as well as, a decrease in spirits, non-alcoholic beverage, and the food business. However, the beer business saw an improvement with a decrease in net loss.

Spirits Business 
For the third quarter of 2013, spirits sales volume increased by 4%, which mainly came from an increase in sales volume of white spirits. The sales of spirits business increased 7.4% when compared to the same period of last year. However, the net profit of Baht 4,322 million decreased by 13.2%YoY 28/32 due to the high margin base effect from an increase in selling price, while the cost of production was still based on the previous tax rate before the excise tax was increased last year.

Beer Business 
For the third quarter of 2013, sales of the beer business was Baht 6,624 million or decreased by 7.4% 
when compared to the same period of last year mainly due to a decrease in sales volume. Nevertheless, an increase in selling price, a decrease in material costs and depreciation resulted to the decrease in net loss in this quarter when compared to the same period of last year. The net loss of beer segment was Baht 246 million, or a decrease of Baht 78 million. 

Non-alcohol Business 
For the third quarter of 2013, the non-alcohol beverage business reported sales of Baht 3,542 million or decreased by 51.6%YoY mainly due to a decrease in sales of Sermsuk. At the end of 2012, the bottling agreement between Sermsuk and an international enterprise was terminated, and Sermsuk subsequently launched “est” cola and flavored carbonated soft drinks to the market nationwide. The sales volume of Sermsuk dropped by 39.8% when compared YoY.
The sales volume of Oishi saw a decrease by 11.2%. Regarding other non-alcohol beverage, the sales volume of soda water increased by 4.0%, while the sales volume of drinking water decreased by 5.1% when compared to the same period of last year.
For the third quarter of 2013, the advertisement and promotional expenses of non-alcohol business decreased. However, a decrease in sales still incurred the net loss of Baht 419 million for the non-alcohol beverage business. 

International Business 
For the third quarter of 2013, the international business had a negative growth rate of 19% when compared YoY mainly due to the lower sales of bulk Scotch whisky, Chinese Yu Lin Quan spirits, and Chang beer. 

My View (November 2013)

Thai Beverages recent result showed that it was currently in the midst of transforming its domestic market oriented strategy (Thailand) to Asean market oriented strategy (by acquiring F&N). However, we still did not see synergy here as the non-alcohol & beer division were still suffering from losses. 

It may take longer time than expected for the management to fully make use of F&N brand to penetrate more markets for its own branded items such as Chang beers & Oishi. While I believe that it may not seem possible to beat Pepsi in Thailand market (as Pepsi is an international market), I hope that the overall non-alcohol business could be strengthened again. 

Nonetheless, ThaiBev still enjoy a rather healthy cash flow due to its dominance in Spirit business. I hope that the management can improve other division so that it can regain confidence from investors. 

Below is the current market trend of Thai Beverages:

Source: Maybank KE Chart

24 November 2013

Johor - Changes of Working Days to Sunday to Thursday (From Jan 2014 Onwards)

Johor Sultan announced that the working days will change to Sunday to Thursday with effect from January 1 2014.

I just checked with few friends and relatives. Some gave positive and some negative comments on this. The positive comments are:

  • Sunday Banking is possible now. It provides alternatives for Malaysia working in Singapore to come to Johor and do their personal banking services in Johor on Sunday. 
  • Sunday Government - More and more people from private sectors can now go and do their NRIC / Passports without taking leaves on Sunday. 
  • Possible Lesser jam on Friday, especially for those who come back to Johor from Singapore to enjoy weekend home here. 
The negative comments:
  • Schooling changes from Sunday to Friday. It means that for those parents whose working days remain Monday to Friday, they cannot enjoy two days weekend with their kids now. Instead, it may become a headache for them if they are the one who fetch the kids to and from school, especially on Sunday & Friday. 
  • Inefficient in Banking Services / Logistic Services. It may not be as effective as current, as some may work from Sunday to Thursday and some Monday to Friday. It may seems like the actual fully working days are from Monday to Thursday (reduced to 4 days) as compared to now. 
So far, I treat it as slightly negative impact, as foreigners may fear that the policy keeps changing and may affect their foreign direct investment here. A consistent and pro-investment government policy is a need for the state to grow further. However, I fully understand that the government officers (mostly Muslims) would welcome this changes as they can just focus on their own family days on Friday. Just FYI if you are not aware of, Johor holidays actually were Friday and Saturday prior to 1994.  


23 November 2013

Iskandar Malaysia Update - November 2013

IRDA plans to develop Iskandar Malaysia as an Aviation Hub. As CEO Datuk Ismail Ibrahim said Iskandar Malaysia was now ready with the infrastructure required to meet the demand of the regional aviation growth. He said aviation industry had always been a sub-sector promoted by IRDA and falls under Flagship E (Senai/Skudai), where Senai International Airport serves as the gateways and catalyst for the sector's development.

Senai Airport can now accommodate the biggest passenger aircraft, the Airbus A380, and the biggest cargo aircraft, the Antonov 225. The airport has the capacity to handle 3.5 million passengers and 80,000 tonnes of cargo annually as well as 20,000 sq m of apron space for aircraft parking.

“We are also looking forward to the implementation of the Asean Open Skies policy which will take effect in 2015. It is envisioned that the Asean region will see faster traffic growth and connectivity when the Asean sky is liberated in 2015,’’ said Ismail.

Source:
http://www.thestar.com.my/Business/Business-News/2013/11/18/Plans-for-Iskandar-to-soar-Irda-to-develop-it-as-an-aviation-hub.aspx

My View: As Singapore also is working hard to defend its leadership in Asean regional aviation hubs, I believe the only way for Senai airport to compete is to stand as a complement of Singapore airport, as most of the flights would be focusing on Singapore instead of Senai, and Malaysia will also focus on KLIA / KLIA2. Nonetheless, it can be a good gateways for foreigners to fly here from KL and enjoy a 2 days trip in Legoland / other recreation activities before heading back home via Singapore airports.

Johor state is in the plan of changing weekends holidays to Friday & Saturday from current Saturday & Sunday. 

Source: http://www.thestar.com.my/News/Nation/2013/11/18/Weekend-change-worries-traders-Its-not-timely-say-Johor-groups.aspx

Bus Rapid Transit System will be the main public transport system across the ten corridors of Iskandar Malaysia.

My View: This is at least the first step for Malaysian to enjoy a better public transport system before they develop a MRT system in Iskandar Malaysia here. What I was hoping was that the period of taking bus to town can be shortened by at least 50% so that more people are willing to ride on the public transport instead of driving cars. 

Source: http://www.trl.co.uk/trl-news-hub/transport-news/latest-transport-news/malaysian-government-outlines-long-term-transport-plan_801660286.htm

http://www.nst.com.my/nation/general/long-term-plan-to-boost-public-transport-1.399209



21 November 2013

Introduction to New Shares Investors - Trade Key In (November 2013)

Since I have became remisier two years ago, I have met quite a few new clients who do not have any ideas on investing. In this post, I would like to share with you on how to key in trade through Smart Phone / Desktop Application instead of calling remisier to put in trade.

Some benefits of putting trade yourself instead of calling remisiers are:

  • Save Execution Costs - You can save a big chunk if you are a heavy trader. Even if you are not, you can still achieve better result by saving the execution costs in long run. You may find a number of broking firm providing you a simple yet easy to use application to put in trade and monitor your stock portfolio. 
  • Save hassle of not being able to reach remisier, especially during peak hours. You can simply putting the trade in queue even before the market is opened. 
Of course, you may also loose a chance to get remisier's advance as it would become DIY service. Nonetheless, if you think you can get a better result without remisier's assistance, you may just focus on DIY service. Let me explain the field that you need to fill in in order to get the trade done.

Counter Name: The shares that you want to Buy or Sell. You may get it from the Searching Field.
Action: Buy or Sell. Please be extra cautious when selecting Buy or Sell.
Payment Mode: Cash, SRS, CPF. You have to get your SRS/CPF Investment Account linked first before putting any SRS/CPF trade. You may contact your dealer/broker on this. 
Settlement Currency: The Settlement Currency by default would be SGD or the Counter's Denominated Currency. 
Force Key: By default is Empty, unless you want to subscribe this service. My advice is not to use this as chances of getting the trade done outside the 20 bid range is rather very low. 

Please check again the information you have put in before click on "Submit" button as the action cannot be reversed after the trade is submitted and filled up. You may contact your broker/dealer in case you accidentally selected wrong payment mode (i.e. this is a CPF trade instead of Cash trade etc) on the same trading day before market closed, so that he/she may have a chance to amend the payment mode for you. 

So please treat it as part of your online banking transaction that requires additional care. 

Feel free to check with me so that I can improve my post here. Thank You. 

17 November 2013

Sino Grandness, Almost There - November 2013 (Latest Update 24 Dec 2013)

Sino Grandness just released its latest quarterly report this month. Summary of the 9M13 report shown as below:

Revenue RMB 1,718.1 M, Up 39.2%
Gross Profit RMB 657.9 M, Up 40.5%
Gross Profit Margin 38.3%, Up 0.4%
Net Profit RMB 341.7 M, Up 52.4%
Net Profit Margin  19.9%


Beverage % Of Total Revenue = 59.5%
Oversea Canned Products % Of Total Revenue = 32.2%
Domestic Canned Products% Of Total Revenue  = 8.3%

From here, we can conclude that about 60% of the revenue is from Beverage division, which I think is quite in line with group's strategy to focus in domestic beverage market and get it listed in Hong Kong Exchange. If the group can manage to have at least RMB 300 M more revenue from beverage division for 4Q2013, I believe it can hit RMB 250M Net Profit target and has higher chance to get Garden Fresh listed in Hong Kong Exchange by October next year.

Beverage Revenue Trend From 1Q11 to 3Q13

EPS 9M13 stood at 12.2 Sing cents, which translated to annualized EPS 16.3 Sing cents, or 4.69 PE.

With Sino Grandness latest plan to increase CAPEX to double up current capacity (about RMB 600 M), I believe the future revenue growing speed should be at least in tandem of the speed of CAPEX plan. What worried me was the Free Cash Flow. Now with company to aggressively promoting its beverages to distributors, a big chunk of operating cash flows is used to support the credit sales.


Nonetheless, I am still quite impressed with the result Sino Grandness achieved so far, and with the hope the beverages division can be listed successfully next year. So let's see what market can re-value the market value next year if Garden Fresh can be listed successfully, and how management can push the non-beverage division for domestic market next year. I hope that the Cash Conversion Cycle can be reduced with diversified distributor network and strengthened relationship.

Last Updated: 18 November 2013

I got the reply from Sino Grandness IR department, that Sino Grandness intended to use the spin off proceed of Garden Fresh to partly support its huge CAPEX plan next year. It seems that Sino Grandness is quite confident in getting Garden Fresh listed IPO by next year. With Big 4 to audit the report before listed next year, I believe the IPO can attract many investors (provided it is granted permission to be listed by Oct 2014). 

With no any customers contributed to more than 5% of total revenue, the company is confident that they are well control in bad debt. 

So now I have little more confidence in this company. Although I will not be putting any fresh money in this counter at current price, but will just wait for any sudden drop again (like China Minzhong short selling issue earlier this year) to take up the opportunity again.

Again, I prefer ambitious company with careful corporate finance planning. I hope Mr. Goh can further assist 黄总 in achieving their goals in building a successful story. 

Last Updated: December 2013

Below is the screen shot which I compiled from company's annual report (audited) and quarterly report (un-audited). Please note that quarterly report figure may differ from audited annual report later. However, I hope that the changes are not major. 





















Below is a link I found from internet (written in English). In summary, it mentioned that Garden Fresh had grown up to "luxury" fruit drinks brand in China Mainland, with so many efforts made in sales exhibition, advertising & promotion campaigns. It is now the number 1 loquat juice brand in China. You may come to the link here to take a look. 




07 November 2013

US Market Record High - November 2013

US Market advanced, sending the Dow Jones Industrial Average to a record close, as Federal Reserve officials said economic weakness warrants continued stimulus and investors await data this week on jobs and growth.

My thought is that, with stimulus to continue (we may see a reducing amount of QE next year), the investors still prefer to stay investing in equity market. I am still not sure when the interest rate will go up, but I believe that it will eventually, to curb the inflation. 

While Singapore use Currency as its main tool to fight against inflation (imported goods), it may also follow US step to increase the interest rate to stop hot monies from flowing into the country. Now, with so many cooling measurement applied to property market, we do see a continued interested among Chinese investors to purchase private properties here. 

Singapore market still does not recover from its peak in May 2013, which I think is a bit weird. Maybe the hot money continue to flow back to US market, once signal of recovery there is strengthen. Nonetheless, I still look good on Singapore stock market as the overall market PE remains at reasonable level.

Mr. Cheng from Wing Tai was appointed as Deputy Chairman of Temasek. I believe it is due to his vast experience in oversea business. I hope that he can bring in more ideas for Temasek to continue to grow the fund in prudent way. 


Source: http://www.bloomberg.com/news/2013-11-06/u-s-stock-index-futures-rise-amid-stimulus-speculation.html

http://www.straitstimes.com/breaking-news/money/story/temasek-holdings-appoints-cheng-wai-keung-deputy-chairman-20131105

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