28 May 2014

Some Keynotes from LKH Annual Report FY14

Operation Highlight. Source: Company Annual Report

Corporate Development & Prospects

  • S$114.3m construction project awarded in June 2013 for hotel development by Genting Singapore
  • 1,145 units at the Minton TOP in November 2013. 
  • Parkland Residences @ Upper Serangoon Road (DBSS Project) only 4 units remains unsold - profit to be recognized when TOP end 2014
  • Paya Lebar Square - sold 96% office units and to retain the retail units (about 82% leased as of April 2014) for cash flow generation - profit to be recognized when TOP end 2014
  • Completed purchase of the freehold Kismis Lodge for $84.2 million (70% stake) to be redeveloped into a 3-storey with a basement mixed landed residential development
  • Completed purchase of 15 commercial units and 1 penthouse residential unit at Balestier Tower for $77.4 million for development purpose
  • November 2013 - Accepted a conditional offer to sell our land (20% stake) at Jalan Conlay, Seksyen 63, Kuala Lumpur, Malaysia to an unrelated third party for a total cash consideration of RM568 million (S$221 million). The transaction is targeted to complete by Q2 FY2015 and would generate pre-tax gain of approximately RM247 million (S$96 million) (Jack: could be around S$15m net profit)
  • January 2014 - to purchase 295 strata-titled office units on levels 6 to 25 of Westgate Tower at 1 Gateway Drive, on lot 8360V Mukim 5, Singapore (40% stake). The purchase price is $579.4 million and it is purchased for long term investment purpose (Jack: could be around S$10m - S$20 m recurring income for 40% stake)
  • to purchase 616,461 square feet of land at Banda Seri Alam, Johor for RM74.0 million (S$29.0 million) via associated company for development purpose. The purchase is expected to be completed in financial year ending 31 January 2015
  • Duxton Hotel Perth and Duxton Hotel Saigon did not performed as well during current year when compared to last year due to the slow down in both Perth and Vietnam economies. During the year, the F&B business faced major operational challenges and management is currently working on streamlining its activities with a view to improving profitability
  • Our outlook is cautiously positive in view of the expected slower growth in the global economy and also as Singapore undergoes economic restructuring in order to create sustained growth. The latest round of cooling measures introduced by the government in January 2013 and the release of more land for development to cool the residential market have reduced buying volume while stabilizing prices. We will continue to be selective in our project tendering. We will also continue to invest in business that will generate consistent revenue and profitability streams

Income Statement. Source: Company Annual Report

  • Most of the profits are actually from "Share of results of Joint Ventures & Associated Companies" so you would see that the group mostly relies on JV / Associated companies to grow the earnings. 
  • As property market is in the down trend cycle, the group is now focus on boosting recurring income by increasing investment in properties such as West Gate Tower etc. 
  • As the two projects to be recognized under Completion of Contract method by end of financial year 2015, so we would expect the share price could be "encouraged" towards end of the financial year. 
  • LKH's shareholding is highly concentrated under Low's family and we believe that it could encourage the BOD would strive harder and award the minor shareholders with good dividend yield (more than 50% dividend payout last financial year)
  • Recent news on Singapore property market is that the government encourages "normalization" of property price in Singapore so that most Singaporean could afford and even upgrade their houses through softening property price. Nonetheless, I believe the current situation would remain weaker until next general election as housing issue is always one of the good debate topics from opposition parties. Nonetheless, as long as interest rate remains below 2.5%, real estate is always a good alternative investment choice for rich folks to park their excess money in to battle for long term inflation rate (estimated in between 2% - 3% CPI in long run)

26 May 2014

Interest Rate Parity - MYR vs SGD

It's noted that Malaysia Ringgit always enjoy higher interest rate against Singapore Dollar in long run. Part of the reasons is that Singapore government prefer to use monetary policy to control the inflation. According to interest rate parity theory, MYR will depreciate against SGD in long run in order to remain in the "balance" for the cash flow in between two countries.

And you would notice that normally for currencies that enjoy good credit ratings, they may be required for lower interest rate against those currencies that have lower credit ratings. This is always based on Supply-Demand issue.

But another theory state that as long as the country that have higher interest rate can attract more foreign direct investment and enjoy a better GDP growth, then this currency could play a catch up against a country which suffered from economy recession and would have to depreciate it against other currencies in order to boost up the economy.

Currently RM/SGD is around 2.59 - 2.60. So it would be wise if we liquidate SGD to purchase a RM denominated properties / securities only if selecting a good purchase. After all, I noticed that HDB could enjoy around 5% - 7% compound annual growth rate for the past 40 years. So, it would be wise if we could achieve at least 10% compound annual growth rate for a MYR denominated investment to offset the depreciation of RM against SGD. Or we may be praying that Malaysia could have a better GDP growth against Singapore in long run which I believe it may be achieved, provided Malaysia could also transform to an economy that relies on high technology instead of intensive labor cost.

22 May 2014

SATS FY14 Result Summary - May 2014

Highlights of the group's result abstracted from the news released by the group:

For the financial year ended 31 March 2014, Group revenue declined 1.8% year-on-year to $1.79 billion. Revenue from gateway services increased 4.5% to $678.1 million due to growth in flights (+9%) and airfreight (+2.6%) handled. Revenue from food solutions dropped 5.2% to $1.1 billion, mainly due to the translation loss on TFK’s revenue arising from the weakening of the Japanese Yen. In addition, unit meal volumes were 5.8% lower due mainly to the shift of Qantas Airways’ transit hub from Singapore to Dubai.

Operating expenditure decreased 0.7% to $1.62 billion and consequently, operating profit fell 11.1% to $171 million.

Share of results of associates/JV, net of tax, declined 10.4% to $47.2 million.

During the financial year in review, the Group made a one-off impairment provision of $2.6 million for assets held for sale. These assets comprise of shares held in a subsidiary and two associates which are under negotiation for potential sale. The Group also benefited from the write-back of prior year tax provision of $6.9 million.

As a result, profit attributable to owners of the Company declined 2.4% to $180.4 million. Excluding the one-off items, underlying net profit from continuing operations was $183 million, 9.4% lower than last year.

The group is proposing final dividend of 8cents and it brings total dividends to 13 cents, 2 cents lower compared to previous year. The dividend yield based on current market price is around 3.8%.


Our operating landscape remains challenging in view of rising costs and ongoing pressure on regional aviation. At Changi Airport, we expect moderate growth in passenger traffic and marginal growth in airfreight.

We will continue to leverage our state-of-the-art facilities, comprehensive suite of services and new technologies to obtain scale advantages, improve productivity and enhance connectivity for our customers. We are also growing new businesses and customer segments.

Said Mr Alex Hungate, President and CEO of SATS: "Our FY13-14 results reflect the challenging business environment we operate in, with pressure on the regional aviation industry combined with higher staff costs. However, we are confident in Singapore and the region’s medium to long-term growth prospects and we remain focused on achieving our strategic goals of growing scale and enhancing connectivity as demonstrated by our recent acquisition of 41.65% equity stake in PT Cardig Aero Services in Indonesia.”

My Notes

  • Overall business and profit is lower than previous year, part of the reasons was due to challenging business environment, higher staff costs etc. (Jack: higher staff costs partly due to the levies imposed by the government which gave negative impact to various sectors. Changi airport is also competing with many other airport operators to lure more airplanes to stop / transit in Singapore)
  • ROE is about 12.8% (still below my preference 15% target) but this is a company with good free cash flow generated. It is suitable for investors who prefer a stable dividend income in long run basis. 
  • Trailing Dividend Yield (13 / 337) = 3.85% with trailing PE = 21.0X. I would prefer to buy if the PE could be below 15X to provide a better margin of safety to me. Maybe share price of  below S$2.40 is a better entry price for me.

21 May 2014

SingPost Full Year 2013 Summary - May 2014

  • The group recorded growth in both revenue and net profit thanks to the growth in logistic division and retail & eCommerce division
  • Domestic mail volumes continued to decline for second consecutive year, compounded by escalating labour costs
  • Increasing cost pressures especially in Singapore, together with continued investment in service quality and productivity in Singapore
  • Continued investment in service quality and productivity in Singapore
    • Committed to obligations as Public Postal Licensee (PPL)
    • Investing S$100 million to drive innovation, productivity and customer service to bring greater value to customers
    • Investment include advanced mail sorting equipment, an intelligent alternative delivery
    • network (POPStations) and a higher capacity three-wheeler fleet which is also safer for the postmen
  • Good progress in transformation programme
    • Further progress on end-to-end e-commerce logistics capabilities and network in Asian markets, with over 600 e-commerce customers
    • Integration of new M&As progressing
    • Increased revenue contributions from regional markets
  • The group now focus on growing logistic & eCommerce business, while reducing reliance on domestic mailing services (dropped to 55.5% of overall revenue from 62.9% corresponding period)
  • Oversea revenue also made up about 28% of total revenue compared to 19% a year ago 
  • Group proposed final dividend of 2.5 cents. Full year dividend of 6.25 cents matched previous year dps and it is translated to 4.17% dividend yield based on current market price. I think the long term grow rate is at the low single digit level, and hence 22X trailing PE seems unattractive to me. We will wait and see whether the group could transform to diversified group with better operating efficiency & profit margin and hence the high PE can be justified. 
  • This counter is good for those investors who prefer for a stable dividend income for long period as I believe the group can still enjoy a good free cash flow for coming years ahead. 

20 May 2014

Penang Trip - April 2014

Last month my family and I went to Penang for a short trip. There were many reasons why we go to Penang:
Food; Beach; Heritage Scene; etc. Thanks to E&O (Singapore Branch) and arrangement with E&O Malaysia office, we had a complimentary one night stay at Lone Pine Hotel in Batu Feringgi, Penang and a short tour to E&O's prestigious project - Andaman Series located at Seri Tanjung Penang.

We went to Penang via the Penang Second bridge at Batu Kawan. The length of the bridge is nearly 2 times of first bridge located at Seberang Perai. It is a landmark of Penang and achievement under CM Lim Guan Eng although the project was actually started off before PR took over from BN on 2008 general election.

Middle of Penang Second Bridge.

Lone Pine Hotel is one of the earliest hotel operators in the famous tourism belt in Batu Feringgi, Penang which is managed under E&O group. It is about 20 minutes drive away from Georgetown, Penang. For beach lover, you definitely will enjoy the beach as well as the water sports facilities there. Facilities of the hotel include free Wifi, swimming pool, bungalow restaurant and a bar. We were warmly welcomed by the friendly staffs there with welcome drinks and the staff brought us to one of the 99 rooms in Lone Pine Hotel located at the third floor that provides a good sea front view. He also explained to us nicely on the facilities in the room. Although the check in time is on afternoon, but the staff managed to get us have an early check in on 12:30 noon which we were quite happy with that.

After a quick check in, I went to E&O Sales Gallery to know more about the Seri Tanjung Penang project by E&O group which was started off since more than 7 years ago. If you are not too sure about Seri Tanjung Penang, it is a maiden project of E&O in Penang which comprises of Semi-Detached home, Bungalows, Condominiums, as well shopping mall with yachting facilities. You may refer to the below map on the location.

Location of Seri Tanjung Penang

From the master plan here, The Andaman Series is one of the second phase development by the group. "Andaman" is named after the Andaman Sea which the proposed condominiums are facing to. The high rise project comprises of 1-Bed, 2-Bed and 3-Bedrooms condos with most of the them facing Andaman Sea. The buyers can enjoy the excited sea front view as well as the fantastic clubhouse facilities such as swimming pools, meeting room, gym room and even a mini theater that would definitely bring a lot of fun to the family.

Classic Bathroom, source: Company

The sales manager - Ms. Caryn brought me to the show rooms at E&O Sales Gallery in Seri Tanjung Penang. According to her, the buyers majority were locals while foreign buyers mainly from Asia countries such as Japan, Singapore, and Hong Kong etc. She also mentioned to me that the properties in Penang was rising very fast, a double storey terrace house in Seri Tanjung Penang which was sold RM700K++ 6-7 years ago was asking for RM2 million and above in current resale market!

Apart from the reason other than hot money flowed to Asia market since year 2009 after the financial crisis, I believe that the strong branding and recognition for E&O group has made a lot of investors to be multi-millionaires in just few years time. What a miss to me, have I invested earlier in Penang during the global financial crisis. To know more about this project, you may refer to the news here and contact the sales staff here.

After visiting Seri Tanjung Penang, my family and I went to the famous Gurney Drive hawker center and had a dinner over there. There was plenty of choices there, and you could easily fall into love the Penang food and definitely come again next time. But as vegetarians, there was only one stall so we ordered Hokkien Kuey Tiaw.

The next day we went to Guan Yin temple at Ayer Hitam and enjoy the view there. We also went to have delicious food in various places. Below are some of the food pictures taken from different restaurants / hawker centers:

Vegetarian Hokkien (Prawn) Mee

Vegetarian Curry Mee

Vegetarian Penang Laksa

Vegetarian Dumplings Made with "xiao mi" 

Vegetarian Crispy Chicken Satay with Great Gravy

Vegetarian "Wet" Popiah 

Are you feeling hungry now? Come to Penang now! You may even consider to have Malaysia My Second Home scheme with a purchase of property in Penang to enjoy the good food & good scene there.

Malaysia, Truly Asia. :-)

Keong Hong 1H2014 Result Summary - May 2014

Summary abstracted from Company's latest release on May 2014.


  • Proposes one tier tax-exempt interim dividend of 1.0 Singapore cent per share
  • Proposes a bonus share issue to shareholders on the basis of one bonus share for every two existing ordinary shares
  • Executive condominium project at Edgedale Plains in Punggol Central to be launched in the fourth quarter of 2014

The growth in revenue was due mainly to higher revenue recognition from ongoing projects as well as new projects such as Alexander Central, J Gateway and SkyPark Residences which have commenced work in the fourth quarter of the Company’s last financial year ended 30 September 2013.

While the Group achieved revenue growth of 122.0% in 1H2014 as compared to the 6 months ended 31 March 2013 (“1H2013”) , the increase in the cost of sales of 136.8% to S$104.3 million in 1H2014 were higher in comparison. This was due mainly to higher wages and labour levies. Keong Hong’s ongoing effort to improve workplace safety also contributed to higher business costs.

Consequently, Group’s gross profit margin slipped to 11.6% in 1H2014 from 17.2% in the 1H2013 despite an increase in gross profit by 50.7% to S$13.7 million in 1H2014. The decline in gross profit margin was also partly due to lower margin for new projects in the initial stages of construction.

Keong Hong’s Executive Director and Chief Executive Officer, Mr Ronald Leo (梁定平) remarked, “The financial results are in line with our expectations and have improved as compared to the corresponding period. This reflects our strength and resilience to stay competitive amidst intensifying competition and rising labour costs and business costs which continue to affect our margins.”


During 1H2014, the Group was awarded the joint tender for an 8,238.5 square metres land parcel at East Coast Road by the Urban Redevelopment Authority for S$352.8 million. The proposed hotel mixed development will comprise of a 500 to 600-room hotel with commercial space for medical suites, offices, retail and F&B. The Company had entered into a joint venture with Master Contract Services Pte Ltd and Asia Development Pte Ltd where it is holding a 20% interest to jointly develop the project.

The Group also expects to launch an executive condominium project at Edgedale Plains in Punggol Central in the fourth quarter of 2014.

The Group’s Maldives projects are currently in various stages of construction and development. The expansion of the Kooddoo domestic airport in Gaafu Alifu Atoll, including infrastructure work for the extension of its existing runway are slated for completion by the first quarter of 2015. The development of an airport hotel on the island of Kooddoo and a tourist resort on the island of Maamutaa in Maldives are slated for completion in 2015 and 2016 respectively.

As at 31 March 2014, the Group’s total construction order book stood at approximately S$494 million which will provide the Group with a sustainable flow of activities till 2016. The Group’s construction project pipeline includes Paterson 2, The Terrasse, Twin Waterfalls, Alexandra Central, J Gateway and SkyPark Residences.


In light of the Group’s performance, the Board of Directors has proposed a one tier tax-exempt interim dividend of 1.0 Singapore cent per share, which works out to a dividend payout ratio of 18.0%.

The Company is also proposing a bonus share issue to shareholders on the basis of one bonus share for every two existing ordinary shares to reward the shareholders for their loyalty, and continuing support for the Company as well as to reflect the growth and expansion of the Group’s business.


The Building and Construction Authority (“BCA”) expects the overall construction demand in Singapore for 2014 to remain strong at between S$31.0 and S$38.0 billion, fuelled by higher demand for public sector projects which are expected to contribute close to 60.0% or between S$19.0 and S$22.0 billion. However, the private sector demand is expected to moderate between S$12.0 and S$16.0 billion in 2014 as compared to S$21 billion in 2013.

The Group expects the construction and building industry to continue to face challenges. The property cooling measures introduced by the Government and the substantial supply of completed housing units over the next few years will also have some downward pressure on prices and profits in the industry.

Mr Ronald Leo added, “We have stepped up our overseas development activities in the Maldives and also expanded into hotel development through the land parcel at East Coast Road, and we believe this will enhance our overall competitiveness and pave the way for future growth.”

My Notes

  • The company is listed in Catalist Board, so it normally release financial report on half yearly basis unlike main board listed companies which release financial report on quarterly basis. 
  • With current order book of S$494 million, it would bring in gross profit of around S$57 m for the group (if based on current gross profit margin of around 11.6%) or average S$19 m per year if average lifespan of the project is about 3 years. Net profit would be roughly around S$12 m per year for construction business under current order book. 
  • The group is also having 20% stake in Executive Condo JV with FCL & MBL. It is easily to generate around S$15 m - S$20 m net profit for each project. 
  • The group also venture into hotel / resort management in Maldives which may also bring in net profit of few million Singapore dollars. 
  • The latest news of the group is to venture into Commercial mixed development in East Cost together with the other 2 developers. It could bring in around S$10 m - S$15 m operating profit to the group
  • The group also invest in Kori holdings and enjoy 5% yield from this investment. It is convertible to shares of Kori holdings also. 
  • So if we combine altogether, the group can transform to a medium cap counter from small cap counter today in 3 - 4 years time
  • It is good investment for investors who have enough patience to wait for the group to grow further, while it is still remains unpopular among big investors in the market 

19 May 2014

OSIM - 2014Q1 Result - May 2014

Below is the summary of OSIM result extracted from the news released by the co:

Record Profit in 2014

We have achieved growth in profitability for 21 consecutive quarters.

Q1 sales were $173 million +15%. The increase in sales was driven by higher consumer demand for OSIM products like uInfinity, uDivine App, uDiva, uPhoria Warm, uHug, uPixie, uCozy, uRelax, uPebble, uSlender, uShape, nutritional supplements like Taut, Stem C, Zhi , Triflex, Liver Protector and luxury tea like Sakura Tea and Follow Me Tea. TWG Tea became a subsidiary in October 2013 and has also contributed to the sales.

Revenue by Region
South Asia's increased sales were mainly due to the maiden consolidation of TWG Tea's sales after it became a subsidiary in October 2013.

Q1 profit before tax reached a high of $37 million +17%. The better performance was due mainly to an increase in sales and better productivity. The increase in operating expenses was mainly due to increases in wages and rental but our better productivity in sales per outlet resulted in better profits.

We are pleased that the core business of OSIM continued to grow during the year. Our nutritional supplements subsidiary ONI Global also grew profits. Q1 profit after tax was a record $29 million +15%.

Global Network of Outlets
The company targeted to have 45 TWG Tea outlets by end of FY14.

My Notes

Annualized EPS is around 15.24 cents and estimated annualized PE is around 18.5X. Net cash generated from operating activities was S$20M and investing cash flow is less than S$2M. It means that Osim is currently a cash cow that generates free cash flow and it provides opportunities for the company to return more cash back to shareholders or use it for further expansion.

The company declared 1 cent dividend payable on 24 July 2014. Based on past year records, Osim may declare full year dividend of at least 6 cents dividend to shareholders, which is translated to 2.1% dividend yield based on current market price.

There is a huge amount of intangible assets in the balance sheet, hence net tangible asset per shares is around 24.7 cents compared to 46 cents of NAV. The P/NTA ratio would be around 11X.

As the company is expanding further on TWG tea business with growth in other division, it is not hard to guess that the group could easily achieve another record year this year. This company is good to invest for those investors who prefer a company that can generate free cash flow and moderate growth in revenue & profits.

17 May 2014

Super Group - 2014Q1 Result Summary - May 2014

Some keynotes abstracted from quarterly report released by the company last few days:

Comparison Versus 2013Q1 Result

- Revenue -6%  in both branded consumer and food ingredient sales, due mainly to citil unrest in Thailand which started in November 2013 and lower food ingredient sales in Thailand.
- Gross Profit -5%
- Gross Profit Margin 37.5% mainly due to effective costs management

- Selling & Distribution E +2% due to group's continuous advertising and promotion campaigns to reinforce Super new logo
- General & Admin E +11%  due mainly to absence of amortization of deferred gain of S$0.8M per quarter and higher administration cost incurred for expanded production facilities.

- Operating Profit - 16%

- Net Finance Income -75% mainly due to lower foreign currency gain
- Net Other Income +42%

- Share of loss of associates -60% mainly due to disposal of Sun Resources in FY2013.

- PBT -20%
- Net PRofit -19%

- Profit attributable to Owners -19%

- CAPEX of S$11M mainly due to construction and equipment costs incurred for the Singapore Tuas factory extension, the new China Changzhou plant, the botanical herbal extraction facility in Malaysia and the Thailand warehouse extension.

- As Thailand is one of the Group’s key BC markets, the prolonged civil unrest in Thailand has negatively affected the Group’s businesses. Management is closely monitoring the development in Thailand and will take the appropriate measures to mitigate the impact on the Group’s businesses.

- The Group expects market conditions to remain competitive in the next twelve months while rising raw material costs and currency fluctuations will impact the Group’s operating performance. Management is, however, familiar with these challenges and will take appropriate actions to mitigate their impact on the Group’s businesses. Management is optimistic that the Group’s on-going efforts on branding and product innovations will generate positive contributions to its operating performance in the longer term and allow the Group to stay ahead of competition.

10 May 2014

Ezion MTN program increased to $1.5B

Ezion announced that it has increased the medium term note program which may consists of the term notes / perpeptual / convertibles to $1.5B from $0.5B currently. 

To me this is a good sign as it boost up confidence level as DBS (sole agent) to provide more liquidity to the company to grow the business in long run. Simply to say, Ezion could be in second stage of growth where it could leverage on the additional capital to clinch larger deals which could bring in higher profit margin.

Recent news besides this was that Ezion additional equity raising @ US$155M, which could simply translated to additional US$500M worth of projects (if equity:debt financing ratio still at 30:70 level). 

According to several analyst reports, some of the rig projects were facing delayed issue and it may dampen the demand from both buyers & investors.

Nonetheless, as long as the long term ROE stands at 20% and above, I would consider it as one of my long term investing counters, until any structural changes in fundamental of the co. 

08 May 2014

Sino Grandness 2014Q1 Result - May 2014

Sino Grandness 2014Q1 Result Highlights:

  • 1Q14 beverage segment sales surged 41.3% to RMB334.6m from RMB236.9m  
  • 1Q14 Group gross profit increased 24.4% to RMB187.4m from RMB150.6m due to strong order momentum for beverage and domestic canned products segments  
  • 1Q14  distribution and selling expenses jumped 122.0% to RMB70.7m due to   intensified advertising  and promotional activities ahead of Chengdu Trade   Exhibition  
  • Indicative orders received for “Garden Fresh” juices after conclusion of Chengdu Trade   Exhibition in late March 2014 surged 34.5% to approximately RMB390m  
  • Successfully secured new distributors and introduced various new products during Chengdu Trade Exhibition  
  • Planning to commence export business for beverage segment

For details, you may refer to the link here.

My Opinion

  • Net Operating Cash Flow returned to positive cash flow as receivables was reduced while offset against increase of inventories and reduce in payables. It seems that the company is working harder to control the level of receivables although I am not too sure whether it is related to trade / non-trade receivables. Things to note is that the company is going to build another plants starting this year as they have bought the land from the municipal government last year (you can check it from the other receivables in their FY2013 annual report). So I think the operating cash flow cannot be simply distributed as dividends to shareholders, instead, it would likely to be retained and used for CAPEX requirement later on. 
  • Convertible bonds of RMB353.8M to be redeemed by the bond shareholders / converted to the shares largely depends on the successful listing of IPO in Hong Kong stock exchange. I believe it is still in the midst / early stage of the preparation so the management did not announce it in the news release from SGX. 
  • As the company is trading at Price/Book ratio of 1.4X, I treat it as a trust from public towards such as a good S-Chip counter despite scandals such as Eratat. 
  • A spike of A&P expenses (nearly double up) in 2014Q1 brought to my attention here. If we look at the past records, this is the first time the A&P expenses achieved nearly 15% of total revenue on 2014Q1 result, although I understood that this is due to management's intensified campaign to promote brand awareness across the mainland. According to the management, indicative orders received for “Garden Fresh” juices after the conclusion of Chengdu Trade Exhibition in late March 2014 surged 34.5% to approximately RMB390 million compared with approximately RMB290 million of indicative orders secured during the same event last year. So it leaves to you to justify whether it is good enough to attract higher orders by double up the A&P expenses. Anyway, to my understanding, normally the company would spend most of the A&P budgets on 1Q as they participated aggressively in Chengdu exhibition.
  • Another concern to me is the slightly drop of exported canned food division (notwithstanding it is still a better result compared to its peers - China Minzhong). As the company is going to spin off the beverage division (hopefully cant be completed by this year), the remaining division such as exported & imported canned food division may not attract high valuation as compared to beverage division. So I believe the company would remain in single PE ratio still. 
  • The company also mentioned in the news that they were in the ongoing discussion with potential distributors for export market of beverage products. I hope that they can keep their business busy while controlling working capitals closely. 
  • With annualized EPS of around 9.75cents, the annualized Price/Earning ratio of the company is around 7.2X. I believe the estimated EPS could be better than 9.75 cents as the net profit margin of full year result would be higher than current quarter result due to normalization of the A&P expenses ratio against the total revenue.

Related Posts:

07 May 2014

Ezion 2014Q1 Report - May 2014

Summary of the Company Result


The Group's revenue for the three months ended 31 March 2014 ("1Q14") increased by US$39.6 million (72.3%) to US$94.4 million as compared to the corresponding three months ended 31 March 2013 ("1Q13"). The increase in revenue was mainly due to the chartering contribution from the deployment of additional units of the Group's Service Rigs.

The cost of sales and servicing for 1Q14 increased by US$16.9 million (56.1%) to US$47.1 million as compared to 1Q13. The increase in cost of sales and servicing was due to the increased business activities.

As a result of the above, the Group's gross profit for 1Q14 improved by US$22.7 million (92.2%) to US$47.3 million as compared to 1Q13.

The higher administrative expenses and other operating expenses in 1Q14 corresponded to the increased business activities as well as increase in the staff strength.

The increase in finance costs in 1Q14 was due mainly to additional interest expense for the funding of newly acquired and delivered Service Rigs.

The lower share of associates and jointly controlled entities' results in 1Q14 as compared to 1Q13 were mainly due to acquisition of the remaining issued share capital of a jointly controlled entity and becoming a fully owned subsidiary of the Group, which is consolidated.

Despite the above, the profit after tax in 1Q14 decreased by US$0.9 million (2%) as compared to 1Q 2013 due to the one-off gain from disposal of a jointly controlled entity recognised in 1Q13. Excluding the gain from the disposal, the profit after tax in 1Q14 increased by US$17.4 million (62%).

Charter income derived from Singapore flagged vessels are exempted from tax under Section 13A of the Income Tax Act of Singapore. Current period income tax expense of US$0.4 million relates to the corporate tax expense and withholding tax expense incurred by vessels operating in certain overseas waters.


Non-current Assets

The Group’s Non-current Assets amounted to US$1,835.6 million as at 31 March 2014. The increase in Noncurrent Assets was mainly due to the acquisition and refurbishment for the Group's Service Rigs. The decrease in Joint Ventures was attributable to the acquisition of the remaining issued share capital of a jointly controlled entity and becoming a fully owned subsidiary of the Group and repayments of loans provided to the jointly controlled entities during the financial period ended 31 March 2014

The Group’s Current Assets amounted to US$459.2 million as at 31 March 2014. The increase was due to an increase in Trade Receivables from the deployment of additional units of the Group's Jack-up Rigs, Cash and Bank balances as a result of the cash flow generated from operations and proceeds from issuance of notes.

Included in the Other Current Assets were the advance payments and deposits made for the construction of vessels and Service Rigs.

The Group’s total liabilities amounted to US$1,417.2 million as at 31 March 2014. The increase in non current financial liabilities was due mainly to the issuance of notes and additional drawdown of bank borrowings to finance the progress construction, acquisition, conversion and refurbishment of the Group's Service Rigs.

Included in other payables were the advance payments and performance deposits received.

The increase in total equity was attributable mainly to the profit derived in the period and issuance of new ordinary shares and redeemable exchangeable preference shares.

The Group’s net cash inflow from operating activities was US$26.7 million. This was mainly due to the net cash generated by the operations of the Group.

The Group’s net cash used in investing activities was US$82.1 million. This was mainly due to the progress payments made and the deployment of funds towards the purchase and refurbishment of the Group's Service Rigs. The net cash used in investing activities was partially offset by proceeds from repayments of loans to joint ventures.

The Group’s net cash inflow from financing activities was US$72.6 million. This was mainly due to the increase in bank borrowings to finance the Group's Service Rigs as well as the issuance notes

Company Outlook

The management is witnessing increased focus on platform and well related work by the oil majors in Asia Pacific, Middle East and West Africa. As a result of this concentration, the Group will continue to focus on investment in Service Rigs to meet the strong demand. The Group will also explore new ways to restructure its Port and Marine Base business to enable it to concentrate on its current key business activities. Ezion expects more assets to be deployed in 2014. The Group also anticipates to taking on new additional Service Rigs projects in the financial year ending 31 December 2014.

My Opinion

Estimated annualized EPS after the recent 100M shares placement offered to Tan Sri Quek could be at around 13.5UScents and annualized EPS could be in the range of 13X, which to me is considered as in reasonable range. As long as the company could maintain the EPS CAGR of more than 13% for next few years, it is considered as cheap counter to me.

The management last time mentioned that the group does not see the need for another round of equity funding until end of this year, which I think is a good news. As current net cash flow from operating still unable to support the current (and future) investing cash flows, I believe that the management may think of another better way (e.g. restructure or park the marine division business into another entity to reduce the overall gearing ratio) to enhance shareholder value in long term.

Let's see if the group could clinch more service rig projects at the mean time to manage its corporate finance to the optimal level. I still think that Ezion is good to hold at current price level.

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05 May 2014

Genting Singapore - 2014Q1 Result Improved - May 2014

For the first quarter of 2014, the Group reported revenue of S$828.8 million, adjusted earnings before interest, tax, depreciation and amortisation (“Adjusted EBITDA”) of S$400.3 million and net profit of S$257.6 million.

Resorts World Sentosa (“RWS”) – Singapore Integrated Resort (“Singapore IR”) generated revenue of S$828.3 million and Adjusted EBITDA of S$402.4 million in the first quarter of 2014. Compared to the first quarter of 2013, the gaming business registered a strong year-on-year revenue growth of 29% on the back of higher rolling volume and win percentage in the premium player business. The non-gaming business recorded a revenue growth of 6% compared to the first quarter of 2013 attributable to higher revenue from the attractions and hotel segments. Our attractions enjoyed a daily average visitation of about 16,000 while the hotel business continued to register high occupancy rate of 92% and an average room rate of S$409.

During the three-month period ended 31 March 2014, the Group invested in a portfolio of quoted securities, unquoted equity investments and compound financial instruments amounting to a net total of S$240.1 million. The Group’s equity injection and shareholder loan to its associate, Landing Jeju Development Co., Ltd, in relation to the development of an integrated resort in Jeju, Korea amounted to S$195.0 million.

Other than the above and as disclosed in the other notes, there have been no material factors that affected the cash flow, working capital, assets or liabilities of the Group.

Our flagship property Resorts World Sentosa achieved significant year-on-year growth on the back of higher rolling volume. Looking ahead however, we will closely monitor the economic developments in the region as the environment appears to be more challenging. We have to dynamically calibrate our credit policies and balance our marketing thrust. Operational profitability remains our priority.

In the face of increasing regional competition, we are streamlining our resort operations and implementing new initiatives to enhance our customer service. We also continue to refresh our offerings and introduce new products. In 2014, our guests can look forward to new attractions in our promenade area and a new exciting attraction in Universal Studios Singapore.

Our Jurong hotel development is progressing well. We have completed the top-down excavation and basement works are currently in progress. Structural works are now at the fifth level. The hotel is on schedule to open in the middle of 2015.

At the Group level, we have on 26 March 2014, completed the transaction to invest in the Jeju, South Korea integrated resort. We are in the process of finalising the development plans and obtaining the relevant approvals from the local authorities.

We continue to be active in researching, analyzing and forming task forces for suitable opportunities within our core expertise. Japan has tabled in Parliament the Casino Introduction Bill and it is scheduled to be read within the next few weeks. With this exciting advancement, we have organized a dedicated project team to understand, monitor and prepare for developments in the near future. We will partner Japanese institutions that will add to the strength of our proposal for an integrated resort in Japan. Such a proposal will also require very significant financial resources that our Group is in a well- placed position to execute.

My Comments
The company is now trying to boost its long term profits via various ways:

  1. Expanding in Singapore by attracting more visitors to come and visit Resort World Sentosa. As you could see, a 6% increase in non-gaming sector would increase more than 20% in gaming sector, it means that for every 1 dollar increase in spending in universal studio and other non-gaming sector for a visitor, it could potentially bring in additional S$3 - S$4 dollars in gaming sector. Average daily 16K visitors would translate to an average yearly 5M - 6M visitors. 
  2. Investing in financial assets. It is just a waste if the company just do nothing but park the excess cash in the banks. So one of the ways to increase the return is to park it under financial assets. 
  3. Venturing oversea - Korea and currently studying the possibility in Japan. This would be the most positive catalyst in long run as mentioned by the management, Jeju project could attract population of around 800 million while Japan market is estimated at 2 - 3 times bigger than Singapore market.
Given annualized EPS of about 7.44 cents, the estimated annualized PE would be around 17X, which I think is quite reasonable for a casino operator. A PB ratio of about 2.0X also values Genting Singapore at reasonable level. 

I believe that the price of Genting Singapore could be strengthened after Korea and Japan project could be finalized soon. While I am not too sure what is the economic profit Jurong hotel could bring it to Genting Singapore, I believe it is partly to return a favor to Singapore government to grant it a gaming license in Singapore by participating in Singapore government's plan to making Jurong another Satellite town like Tampines. 

03 May 2014

Roxy Pacific 2014Q1 Result News - Apr 2014

My View
Roxy Pacific followed other mid cap developers (e.g. Aspial, Hiap Hoe etc) to acquire properties in Australia, particularly in Sydney / Melbourne that enjoyed better occupancy rates & stable recurring income stream. It is not a surprise to me as the Singapore property market has been dampened demand by the government's cooling measurement.

 Nonetheless, Roxy-Pacific remains one of properties in my watch list as I think it is having a good visibility of earnings based on the S$1.0bn pre-sales figures and better performance in Hotel operation.

Some points:

  1. Gross profit margin reduced marginally to 32% due to changes of product mix. 
  2. Annualized EPS is 5.08 and annualized PE is about 11X (considered at higher level among peers)
  3. Annualized ROE is 17.8% compared to 28% FY13. I do expect a higher ROE in between 20%  - 30% as current quarter did not recognize fair value gain in investment properties (mainly in hotel properties).
  4. As the group ventures into Australia properties, a separate team maybe formed up to manage the properties there and it may incur higher operating costs & foreign currency risk.  

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