27 June 2014

CWT FY2013 Annual Report Summary - Last Updated June 2014


CWT is a leading provider of integrated logistics solutions committed to connecting world trade, corporate social responsibility and sustainable business growth. CWT operates across multiple markets and geographies, delivering solutions that help customers succeed and communities thrive.

CWT adopts an integrated business approach with Logistics at the core of its diversified and related business activities which also include Commodity Marketing, Engineering Services and Financial Services. CWT’s ability to integrate its businesses and strengths from its logistics competencies, infrastructure and global network adds value for its customers and stakeholders. CWT is committed to business sustainability and growth through strengthening resources and optimising scale, maximising business and economic synergies, growing revenue and maintaining financial prudence. In addition, CWT adopts a capital recycling strategy through the sale and leaseback of property to fund new business development and expansion.

Group Financial Highlights

Record Revenue S$9.1 B (up 69% yoy), Record Gross Profit S$292M (up 15%), Record Operating Profit After Tax & Non Controlling Interest S$96.5 M (up 12%), Operating EPS 16.1 cents (up 12 %), Net Tangible Assets S$ 558 M (up 17% yoy), Net Asset Value S$ 660 M (up 13% yoy). 

The growth engine was Commodity Marketing (fr S$4.4B to S$8.1B) and Financial Services (fr S$22M to S$65M) while Logistic services (fr S$808M to S$799M) and Engineering services (fr S$157M to S$134M) seen a slow down. Nonetheless, the main profit contributor was Logistic services with profit before tax of S$77M while financial services registered positive result (S$4M) compared to S$6M loss a year ago.  

Chairman Statements

In 2013, we expanded warehouse capacity to over 12 million square feet, grew commodity logistics operations network and continued to re-engineer work processes for increased productivity. We also acquired synergistic businesses, consolidated and integrated core resources from container logistics, transportation, packaging and packing operations as part of an internal business rationalisation. Our investments in competitive advantage signal our renewed commitment to customers.

In 2013, MRI generated sales of S$8.1 billion, up 84% compared to 2012. During the year under review, we reorganised the MRI leadership team, strengthened our core and expanded our energy marketing portfolio. We shall continue to review, rationalise and optimise our commodity marketing operations to provide a lean and robust platform for future growth and new businesses

In April 2013, we issued S$100 million of securities notes from our S$500 million multi-currency debt issuance program. The net proceeds were used to fund general corporate developments. Most of the Group’s capital spending of S$184 million went towards our logistics infrastructure developments. We also made a few strategic acquisitions. These investments strengthen our competitive advantage and help us create value for shareholders and customers.

To reward shareholders, the Board of Directors has recommended a near 17% increase in shareholders’
dividend payment to 3.5 cents per share. This will amount to a total of around S$21 million. 

CWT is constantly evolving. We are investing in growth capability and capacity to strengthen our foundation, take advantage of market opportunities, and build an enduring legacy. Our scale of operations and strategic investments over time are a competitive advantage. Our financial strength gives us the flexibility and muscle to achieve such advantages integral to our long-term growth. Looking ahead, we will continue to accelerate the Group’s ability to build and improve on our sustainable business model.

Summary of Service Offering

Group 5 Years Financial Summary

As you can see from above table, ROE of the company maintained at more than 11% over the past 5 years. Besides that, you could see an increase of dividend (excluding special dividend) from 2 cents to 3.5 cents over the period. The revenue surged since FY 2011 after the acquisition of commodities marketing arm during the financial period. Net gearing remains at manageable level, which indicates that there is still room for the group to have additional borrowings to grow the overall business.

25 June 2014

Tai Sin Electric Annual Report (FY2013) Summary - June 2014

Company Profile

Tai Sin Electric Cables Manufacturer Pte Ltd was established with foresight and determination as a cable manufacturing business in 1980. Today, after over 30 years of strategic expansion and diversification, the Group emerged as a leading and trusted electric solutions specialist in Asia. Listed on the Stock Exchange of
Singapore, SESDAQ in 1998, the exceptional growth and operational excellence was rewarded with a transfer to the SGX Main Board in 2005.

Presently known as Tai Sin Electric Limited Group of Companies, the business is streamlined into four Business Divisions. In 2012, a newly acquired group in the business of test and inspection was added to the Services Division offering alongside with Manufacturing, Distribution, and Strategic Investment. These divisions are well designed to meet the specific needs of our diverse customers ranging from endusers to contractors, manufacturers, system integrators, engineers and consultants. The business mix of the divisions has allowed the Group to continue to achieve growth during difficult times. 

Having a substantial scale of operations in strategic locations continues to strengthen our value proposition to our customers. The Group operates a highly successful network distributing electrical and control products, accessories and solutions to a wide range of local and regional industries which includes Malaysia, Vietnam, Brunei, Indonesia and as far as New Zealand.

Group Financial Highlights (FY Ended 30 June 2013)

The group achieved S$305M revenue, up 9% compared to previous year, with S$24M profit before tax in hand. Company has S$24M cash and S$130M Net Assets.  The EPS was 4.86 cents, NAV stood at 29.76 cents. 

Operations Review

Cable & Wire (C&W) Segment - Contributed 55.44% of total group revenue and 78.86% of profit before tax. An 6% annual increase to S$169.26 M. Tri-Plant Axis Strategy to be strategic contributor to the C&W Segment located in Singapore, Malaysia and Vietnam. Continued prudent management of copper purchasing together with central material procurement policy has lowered raw material cost (Jack: You would see an improvement of gross profit margin over the years).

Electrical Material Distribution (EMD) Segment - Contributed 31.49% of the Group’s total revenue. Segment revenue was $96.13 million, 2.10% higher than the $94.16 million from the previous year, mainly attributed to several major contracts within the Infrastructure and Commercial & Residential Sectors. 

Outlook & Plan

Continued economic uncertainties arising from challenges faced by the Eurozone countries and lack of strong evidence of full recovery in the US and Japan economies, had hampered growth in the first half of FY 2013. For Asia, especially the emerging economies of India and China, growth had moderated somewhat and reverberated across other countries in the region. Sentiments have remained weak with expectations of a mild recovery in the 1st half of FY 2014, and stronger growth in 2nd half of FY 2014 (Jan - June 2014). 

More importantly was that the Singapore government’s package of measures to cool the residential
and, subsequently, the commercial property market seemed to have taken effect by the beginning of new
financial year. Reports had indicated that there would be an oversupply of private residential property from 2016. Sales of commercial property had also slowed.

C&W Segment will continue to focus on the domestic market while casting a wider net in the region to expand market footprint. Cable & wire marketing team plans to further energise its efforts in Johor especially in the Iskandar region, to tap on the Infrastructure and Residential & Commercial Sectors that are expected to come on stream over the next 5 years.

For the EMD Segment, projected new capital investment in the Electronics Cluster expected in 2nd half of FY 2014 means that the company will have to be better geared to harvest more contracts. The EMD Segment is continuously refreshing its business plan that includes forging new partnerships, revamping its customer service programme and extending its offering to include more ‘Green’ products and solutions. 

Financial Ratio Analysis 
  • Company is now trading at PB ratio of 1.23 times and trailing PE ratio of 7.5 times.
  • Trailing dividend yield is around 6%  
  • ROE remains in 8 - 15 x in past 5 years. The ROE was increased last 2 years mainly due to improvement in net profit margin which resulted from larger economic of scale and better operating efficiency.
Largest Shareholders:

23 June 2014

SMRT Group Annual Report (FY2014) Summary - June 2014

Company Background (Source: Company Annual Report)
SMRT Corporation Ltd (SMRT) is the leading multi-modal public transport operator in Singapore. SMRT serves millions of passengers daily by offering a safe, reliable and comprehensive transport network that consists of an extensive MRT and light rail system which connects seamlessly with its island-wide bus and taxi operations.

SMRT also markets and leases the commercial and media spaces within its transport network, and offers engineering consultancy and project management as well as operations and maintenance services, locally and internationally.

SMRT is one of the leading public transport providers in Singapore besides Comfort Delgro, which operates bus (own SBS Transit), light rail and taxi services in Singapore. SMRT is focused more on island business as compared to Comfort Delgro, so it is certainly a better benchmark for public transport against other competitors in SGX Mainboard.

The Group FY2014 performance was largely lacking behind, with profits were recorded at $61.9 million on the back of revenue of $1.16 billion. The profit margin was a mere 5.3%.

Whilst revenue and ridership continue to increase, our profits remain depressed because of increasing operational costs and depreciation arising from capital expenditures, primarily to meet our regulatory obligations. Operating profit in FY2014 was $26.0 million lower than the last FY as a result of declining
rail operating profit, and operating costs outpacing fare revenue growth.

Overall, the group's fare business suffered a loss of $25.0 million for the first time. This loss was mitigated by lower Bus operations losses which declined by 10.6 percent on a year-on-year basis. Profit from Non-Fare business however increased 12.4 percent, due largely to increase in profits from Taxi, Commercial and Engineering Services.


SMRT has intensified discussions with the authorities in the past year and submitted a series of proposals for a new sustainable rail operating and financing framework. The group will continue to work with the authorities in the coming year towards early implementation of the changes.

Even as they work through these proposals with the authorities, they need to maintain our ongoing efforts to address the current business challenges. The April 2014 fare revision will have a positive impact on our revenue in the upcoming financial year. (Jack: Government has agreed to run a scheme where bus operators would lease instead of own the buses from government so that they could focus on operating business via asset light model. It would definitely change the landscape and hopefully we would enjoy better and consistent public transport service in Singapore)

However, it will not fully defray the increases in their operating costs, and it is therefore important that we continue with efforts to extract further efficiency gains across the company. They are also pursuing business growth to deliver shareholder value by adopting a resourceful and diversified approach to explore opportunities in public transportation and related commercial opportunities, locally and overseas

Group Financial Highlights

EPS has decreased from 10.7 cents on FY2010 to 4.1 cents on FY2014, so did DPS drop from 8.5 cents on FY2010 to 2.20 cents on FY2014. It comes to a critical point to SMRT where they would need to reverse the losses for light rail transit and bus operating business. 

The group also suffered from negative free cash flow for the first time in 5 years period. You would also notice that the cash & cash equivalents dropped to around S$150M. Part of the reasons were due to the huge capex incurred for recent years. 

The debt level of the group also increased to 0.60 times (Net Gearing) compared to Net Cash position 2 years ago. ROE and ROA of the group also seen dropping since few years back. From here, we would tell that SMRT is still not a very defensive counter as it would still require a huge capex to repair equipment & enhance the operating efficiency. Hopefully with the new business model in place, the group would enhance its financial position and citizens could enjoy a better ride in future. 

Something to note:
  1. Singapore was trying to introduce driver-less bus here. The government may run a trial in Sentosa Island to test on the feasibility and efficiency of driver-less vehicle in the island. It is a good move as the driver wages was increased quite substantially to attract more locals to take up job as driver as we cannot have a good service without good drivers when new and more buses arrive. 
  2. When Thompson Line is linked to JB in few years time (to be completed by year 2018 - 2021), I think the volume of public transport ridership would increase as there are hundred of thousands of people taking private transports to Singapore from Johor Bahru.  Nonetheless, it is hard to convince private car owners to take public transports unless the benefit they enjoy taking public transports is bigger than taking private cars in Singapore. 

21 June 2014

Neo Group Annual Report FY2014 Summary - June 2014

Neo Group is number one event caterer in Singapore. The Group served 1,118 events around Singapore on 31 January 2014, up from the Singapore record of 1,005 events catered for on the first day of Lunar New Year last year. This has been officially recognised by the Singapore Book of Records as of 28 February 2014 and marks another milestone in the Group’s achievements.

The business of Neo Group is categorized into two main groups:
  • Food Catering business, the Group supplies a comprehensive range of quality food and buffets to diverse clientele through our “Neo Garden Catering”, “Orange Clove Catering”, “Deli Hub Catering” and “Best Catering” brands. In 2012, the Group was ranked as the number one events caterer in Singapore with a 9% share of the $306.6 million events catering market.
  • Food Retail business, the Group operates a successful chain of 22 “umisushi” food retail outlets island wide and 1 licensed outlet in Jakarta as at 31 January 2014, offering Japanese convenience foods as well as delivery services. Targeting students, working adults and young families, its outlets are located island-wide in accessible locations mainly near MRT stations and in shopping malls. The group is targeting to have total 30 outlets by 2016 and 100 outlets in long run. The group is also targeted to launch two Japanese style restaurants by this year (FY2014).
In the second quarter of 2014, Neo group will be completing most of our centralised kitchen at 1 Enterprise Road. Located on a land area of approximately 75,018 sq ft, the kitchen will deploy increased mechanization and incorporate modern food preparation techniques for greater productivity and efficiency as well as consistency in food quality and hygiene. When operational, they expect the centralised kitchen to further increase efficiency and enable them to ramp up daily catering capacity by three to four times.

Snapshots of Financial Result:

My View

Neo Group is now expanding / diversifying its cash flow game via venturing into Japanese restaurant business by this year (FY2014). So if we look on Japanese Restaurant Operator in Singapore - Japan Food, the PE is below 20X with net profit margin of about 50%.

Nonetheless with Trailing PE of more than 20 X, it appeared expensive. But with market cap of around S$100M - S$200M, it really depends on your belief / after your homework of whether the group can grow faster in next 5 years to make a net profit of S$20M and above so that the forward PE could be reduced to below 10X. It is about 2% - 3% trailing dividend yield based on current market price.

20 June 2014

Iskandar Malaysia News - June 2014

Iskandar Malaysia is moving forward to be a world class city which features on Education, Logistic, Industrial, and Services industries that provide sustainable growth here. But I believe that Iskandar Malaysia would try not to compete but complement Singapore, its neighbor which is currently a financial & logistic hub in the region. 

As of current stage, we have seen ventures from private sectors especially theme park operators (LegoLand), movie maker(PineWood) as well as private education providers from U.K. and it is a good start here. 

But to be a livable city, we must also increase efforts in providing higher wage jobs in Iskandar Malaysia besides providing cheaper labor costs to Singapore. So far, there are some concerns from investors / businessmen / public on rising living costs (especially housing affordability issue). The state government was trying to push for more affordable housing to the public (especially for those whose household income are below RM3,000.00). 

The cooperation between Singapore and Malaysia could bring to the successful result, as it may become a "Greater Singapore" in future. It is already an open issue that many people traveling to Singapore from Iskandar Malaysia would face a terrible jam during peak hour (6am - 10am & 5pm - 9pm). Many workers still reluctant to move to cheaper place in Iskandar Malaysia despite the rising rental costs in Singapore due to this issue. Hopefully with MRT / BRT linked to Johor Bahru from Singapore, we would see a structural change here. But whether it could further boost up the purchasing power in Iskandar Malaysia, it still remains questionable.

Summary of the news on June 2014 is shown as below. 

  • UMLand Property Galleria in Singapore : UMLand new property gallery to showcase development products of UMLand in Iskandar Malaysia and Kuala Lumpur Strategically located at Anson Road, the 2,000 sq ft UMLand Property Galleria was recently launched to serve as a UMLand presence in Singapore.
  • Cushman & Wakefield to expand into MalaysiaCushman & Wakefield has expanded into Malaysia. The new office in Kuala Lumpur is C&W’s 35th office in Asia Pacific. Sanjay Verma, CEO for Asia Pacific commented: “This move is in line with our five year strategic plan, which contains an aggressive expansion plan for our business in Asia Pacific. This new office in Kuala Lumpur will help us further increase the depth and breadth of our service offerings to our global clients.” 
  • Iskandar sets RM25b investment goal for 2014: Iskandar Malaysia, foreseeing brighter investment prospects, has set an ambitious goal for the southern economic corridor to rake in RM25 billion in investments in 2014, thanks to the continued vibrancy of the domestic economy.
  • Pinewood Iskandar Malaysia Studios opens in JohorSouth-east Asia's largest integrated studio facility is open for business in Johor and it has already attracted a multi-million-dollar television production from American Internet-streaming service provider Netflix. Pinewood Iskandar Malaysia Studios held its official opening last Saturday. Sitting on 20ha of land, the massive film soundstages are 100,000 sq ft in total, while its television studios and other production facilities take up another 24,000 sq ft.
  • Book on Johor’s sea gypsies out in bookstores: Rapid development in Johor via the Iskandar Malaysia project has made many people forgotten the existence of the Orang Seletar or sea gypsies. Not much is known about the lives of this indigenous people who traditionally live on boats and carry out their living on the sea throughout Johor
  • Iskandar 'complements, not competes with' Singapore industries: The trade ministers of Singapore and Malaysia yesterday emphasised that the Iskandar development region in Johor will complement, rather than compete with, Singapore's own manufacturing sector. They stressed this at the ground-breaking ceremony of Nusajaya Tech Park, the 60:40 project between Singapore's Ascendas and Malaysia's UEM Sunrise.
  • Iskandar's Nusajaya Tech Park breaks ground: The development has 40 per cent pre-commitment for its facilities and is expected to support 200 enterprises when fully operational, the developers say. The projected gross development value is S$1.5 billion (RM3.7 billion) and the first phase of the development is expected to be completed in 2016. Ascendas will have a 60 per cent stake in the project with UEM accounting for the other 40 per cent.
  • Eco World Upbeat On Expansion Strategy:  ECO World Group Bhd expects its asset injection exercise and property sale to give it surplus cash to support its expansion costs. The developer has been aggressively acquiring land over the last 10 months in the Klang Valley, Johor and Penang.
  • Johor royals emerging as KEY PLAYERS in Iskandar property projectsJohor's royal family have emerged as key players in the booming Iskandar property market with major stakes in several developments as well as holdings in related industries.
  • MB needs to drive Iskandar MalaysiaA great many people in Johor have no affinity with this entity called Iskandar Malaysia. Despite all the hype and hullabaloo, they can't relate with it. They have no clue if this is yet one more government department, public corporation, or as pointed out by the young upstart earlier, another bus company.
  • 'It's A One-Stop Centre To Fulfil Housing Needs'State Barisan Nasional assemblymen, who voted for the Johor Housing and Property Board Enactment 2014 yesterday, have assured that the new law would serve the needs of Johoreans.
  • EduCity well on trackUniversity of Reading Malaysia, University of Southampton Malaysia Campus and Newcastle University Medicine Malaysia are set to help redefine the higher education landscape in the country. The three world-renowned British universities, part of EduCity Iskandar in Johor, are keen to set the record straight: they believe with the integrated campus concept fully in place, EduCity will succeed in achieving its goal of becoming a world-class education hub.
  • Iskandar reaching critical mass as investments rise: Iskandar Malaysia is attracting investments that will form a critical mass to kick-start economic activity and power the region to become the special development zone that the Malaysian government envisions it to be, said Ms Sarena Cheah, joint managing director of property developer Sunway Berhad’s property development division.
  • Sunway Outlines RM30b Township Plan In Iskandar: Sunway Property last week unveiled its plans to nurture and foster a vibrant community in Iskandar Malaysia through its township named Sunway Iskandar, which has a gross development value of over RM30 billion. Comprising six different precincts — The Capital, The Parkview, The Lakeview, The Riverside, The Seafront, and The Marketplace — Sunway Iskandar will span across 720ha in Iskandar Malaysia.

19 June 2014

Hock Lian Seng - Annual Report Summary - June 2014

If you are not aware of, Hock Lian Seng is a SGX listed holding company with divisions in civil engineering, property investment and development. Below is the introduction to Hock Lian Seng retrieved from company annual report:

Established in 1969, Hock Lian Seng has undertaken and completed wide range of civil engineering projects for both the public and private sectors in Singapore. We carry out civil engineering works for bridges, expressways, tunnels, Mass Rapid Transit (“MRT”), port facilities, water and sewage facilities and other infrastructure works. The Group has successfully completed Kim Chuan Depot, one of the world’s largest underground depots with housing capacity for up to 77 trains , for the Circle Line in 2007.

Our major customers include government and government related bodies of Singapore, such as the Land Transport Authority, Housing Development Board, PSA Singapore Terminals, Public Utility Board and Civil Aviation Authority of Singapore.

The Group's other core business include property development activities and property investment.

Summary of Financial Result for FY2013:

Total revenue decreased by $11.5 million (11.0%) to $92.8 million for FY2013 mainly due to the lower progress billings for Civil Engineering Segment. The two on hand projects are towards the final stage of construction, thus lower progress billings generated in FY2013. The launch of the Joint Venture Residential Development Project "The Skywoods" in 2013 has contributed $6.4 million in revenue for the Group. Revenue for Investment properties segments was about 10% higher due to the higher rental rate.

Gross profit was $37.6 million for the current financial period, $2.9 million higher than the previous financial year, with higher contribution from both Civil Engineering with more cost saving realized for completed and completing projects. The Properties development segment has contributed $0.8 million in gross profit with the revenue recognized for the JV residential project. Gross profit for Properties Investment segment was $0.9 million higher with the higher rental rate.

Distribution and Selling cost increased by $2.8 million to $3.6 million, this was mainly due to the inclusion of
the construction cost of the show flats and sales office for "The Skywoods".

Profit before taxation decreased by $1.3 million to $29.0 million, resulting mainly from the recognition of the selling cost of the property development projects, lower fair value of the investment property, offset by the higher gross profit.

Below is the snapshot of the summary of financial result for Hock Liang Seng:

Below is the statistics of shareholdings based on Annual Report FY2013, as you notice, the top management related persons have more than 50% of shareholdings, and it indicates that this is a typical family controlled business group.

According to company management, The Civil Engineering division kicked off FY2014 by winning a new construction project of $105 million awarded by Changi Airport Group. This construction project of the
airport taxiway will commence in March 2014. (News: The Group was awarded a $221.8 million project from LTA for the construction of Maxwell station for the Thompson MRT line in April 2014. The new project will commence in 2nd quarter of 2014.)

On the property development front, the Group’s two industrial property development projects, namely
Ark@Garmbas and Ark@KB were more than 70% sold to date. The group expect these projects would contribute significantly to the Group’s result upon obtaining their TOP, expected to be by early 2015.

Our 50% joint venture residential property development, The Skywoods, was launched in September 2013. The cooling measures implemented by the government have dampened the market sentiment and impacted the sales and expected return of the Project. Nonetheless, the group believe the stable economic outlook in Singapore would lend support to the demand and prices of properties in Singapore.

Going forward, the group will continue to actively tender for viable projects and seek appropriate investment opportunities in Singapore or overseas and strive to continue growing their strengths and delivering value to our stakeholders.

My View

With bulk income to be realized from industrial project which is targeted to be completed by next year, I believe the net income as well as dividend payment would increase substantially as well. The business model of the company consists of civil engineering / construction & property investment & property development. I believe with its defensive business model (around S$10 Million gross rental income and higher margin in civil engineering project compared to construction project), it could strive to next level.

The liquidity of the counter remains an issue and you could hardly see any institutional investor in the main shareholders list. Nonetheless, this is a good counter for investors who would like to have stable dividend income (as it has track record of consecutive 5 years dividend payout since listed in year 2009).

Nonetheless, unless the group could able to focus on higher margin projects or in high growth area (unfortunately Singapore property market is now dampened by Government's cooling measurement), I would think the revenue growth and earning growth would remains in single digit for time being after it has a higher chance of achieving record net income for next financial year (FY2015).

My Thought of Investment - June 2014

FED stayed on course with its accommodate monetary policy, while guiding for a modest pick-up in economic growth and interest rates. The VIX Index or Wal Street’s fear gauge dropped 12% to 10.61, its lowest level since 2007.
Markets took a lift after the Fed left benchmark fed funds rate unchanged at 0-0.25%, lowered its long term interest rate estimate, and expressed confidence that the recovery is on track despite cutting its 2014 economic growth forecast to 2.1-2.3% from an earlier projection of 2.8-3%. FED Chairwoman Janet Yellen also downplayed a pick-up in inflation as any sign to tighten monetary policy and argued that the the improving unemployment rate remains elevated.
As widely expected, the FED kept to its plans to wind down its stimulus program and scaled back its bond purchase for the 5th straight month to US$35 Billion.

I believe that the stock market in this year would be stabilized, as more people believe that this would be another record year for DowJones Index & S&P Index. The impact of scaling back bond purchase remains little doubt here, as optimism growing among the investors. 

For Singapore market, it is still largely affected by local policy (e.g. foreign worker tightening & property cooling measurement). I believe that Singapore is still in the transition period which focus on higher technology and reducing reliance on low cost workers. It is seen a price tag cut by 10% - 20% for relaunched private properties in Singapore, and we would expect further normalization of property market in Singapore, so that every citizen could have a nice and affordable home in Singapore. 

Meanwhile, there are some issues in Iskandar Malaysia, where some experts worry of over supply of homes here where job market is playing a catch up against the property market here. With lots of high rise properties targeted to be completed by year 2015 and 2016, it certainly would give some pressure on resale and rental market. Nonetheless to my understanding, commercial rental market in Johor Bahru remains strong and it is a good sign of strong retail / commercial activities in Iskandar Malaysia. 

17 June 2014

EuroSports Global Ltd - FY2014 Report News - May 2014

SINGAPORE, 27 May 2014 – EuroSports Global Limited (“EuroSports Global” and together with its subsidiaries, the “Group”), a leading luxury lifestyle company with the only authorised dealership for Lamborghini automobiles in Singapore listed on the Catalist Board of the Singapore Exchange Securities
Trading Limited on 17 January 2014, today announced a 153.3% increase in net profit to S$17.0 million for the financial year ended 31 March 2014 (“FY2014”). The Group’s earnings were boosted mainly by a one-time gain of S$16.2 million arising from the successful completion of the sale and leaseback arrangement relating to its premises at 30 Teban Gardens Crescent (the “Sale and Leaseback Arrangement”) on 17 March 2014.

Revenue for the year fell 54.0% to S$39.8 million as compared to S$86.4 million in the preceding financial year ended 31 March 2013 (“FY2013”). The decline in the topline was due mainly to new regulations introduced by the government in 2013, which gave rise to additional vehicle registration fees and loan financing restrictions that dampened the automobile sales market for both new and preowned automobiles.

Consequently, gross profit also decreased 48.7% year-on-year (“y-o-y”) from S$17.2 million to S$8.8 million. Notwithstanding the decline, the Group’s gross profit margin rose 2.3 percentage points over the same period from 19.9% to 22.2% mainly due to a change of sales mix as sales of automobiles generally have lower gross profit margins compared to the provision of after-sales services and sale of deLaCour watches.

The decrease in revenue from Sales of Automobiles was largely due to fewer new Lamborghini automobiles sold: 15 in FY2014 compared to 42 in the preceding financial year. Besides the new government regulations, demand for new Lamborghini automobiles in FY2014 was also affected by customers withholding their purchases in anticipation of the arrival of the new Huracán model in 2014, replacing the Gallardo model, which is at the end of its product life cycle.

As a result of lower sales of both new and pre-owned automobiles, the Group’s revenue from the Provision of After-Sales Services fell 5.7% y-o-y to S$5.3 million in FY2014.

However, revenue from the sale of deLaCour watches gained momentum during the year under review because of higher sales achieved by appointed distributors, resulting in a 40.1% y-o-y increase in revenue from the segment to S$3.2 million in FY2014.

Outlook and Future Plans

The Group expects the next 12 months to remain challenging because of intense competition among  automobile distributors in the mature but small Singapore market. However, the Group believes the launch of Lamborghini’s new Huracán model in September 2014 and Alfa Romeo’s new model 4C in July 2014, will stir up some excitement among its customers. This is expected to have a positive impact on sales as the luxury and ultra-luxury automobile segments are model driven markets and sales typically increase when a new model is launched.

To drive growth, the Group will also be utilising the net proceeds from its IPO, where S$6 million had been allocated for the expansion of its operations locally and in other markets and for diversification into other luxury lifestyle businesses. The remaining S$2.46 million in net proceeds, which had been allocated for general working capital, had been utilised.

EuroSports Global’s Executive Chairman and CEO, Mr Melvin Goh, said:

“Sales in our past financial year have been challenging due to the increased vehicle registration fees and financing restrictions, which impacted the buying power of our customers for our automobiles. At the same time, sales of new Lamborghini automobiles also slowed because the Gallardo series was reaching the end of its product life cycle.

“However, we are cautiously optimistic about our performance in the next 12 months because of the new products that have been launched and also because we expect to begin exploring some of the plans and strategies we had outlined in our IPO Offer Document, that will enable the Group to achieve our long term goal to become a luxury lifestyle business with a diversified portfolio of bespoke products.”

Moving forward, EuroSports Global intends to grow its distribution network locally and into other emerging markets in the region. It may expand its distribution network for its existing products into overseas markets or secure distributorships and/or dealerships for new ultra-luxury automobiles and/or luxury automobiles. For overseas expansion, the Group may acquire existing distributorships and/or dealerships in other ultra-luxury automobile and/or luxury automobile markets, or enter into strategic alliances with local distributors and/or dealers of ultra-luxury automobiles and/or luxury automobiles, should such a need arise.

The Group will continue to leverage on its established pool of high net worth customers to build its business as a luxury lifestyle products provider. It plans to acquire distributorships and/or dealerships for more luxury lifestyle products to expand its portfolio.

To expand its distribution network for the deLaCour brand of watches locally and into other emerging markets in the region, the Group may appoint local watch retailers in that particular country to act as
its point of sales and/or local distributors, or it may set up its own boutique watch shops. The Group currently has two Singapore watch retailers, namely Sincere Watch Limited and Watches of Switzerland, as its point of sales in Singapore and also a local distributor in Jakarta, Indonesia. It is currently in discussions with a potential distributor in Bangkok, Thailand.

In line with its growth plans, the Group also intends to expand its operations by way of acquiring and/or constructing improved or new facilities to house its offices, showrooms, service centres and automobile parts and accessories stores. The Group has constructed an annexe to its existing premises at 30 Teban Gardens Crescent comprising an additional two storey showroom, display area and office. There are also plans to construct new facilities consisting of offices, showrooms, service centres and automobile parts and accessories stores at 7 and 9 Chang Charn Road, for which construction is expected to commence in 2015 and take approximately 24 months to complete.

“Overall, the growing number of high net worth individuals in Singapore and the region will continue to support more discretionary spending and the growth of the luxury and ultra-luxury products market. We will continue to leverage on our key competitive strengths like our strong and long-standing relationships with existing automobile manufacturers as well as our close relationships with our customers to improve our near-term sales performance and obtain new distributorships and dealerships to widen our portfolio of automobile as well as luxury products,” added Mr Goh.

About EuroSports Global Limited

The Group specialises in the business of distribution of ultra-luxury automobiles and luxury automobiles and provision of after-sales services. The Group’s automobile distribution business retails new ultra-luxury automobiles and luxury automobiles as well as pre-owned automobiles. It presently carries automobile brands comprising mainly Lamborghini, Pagani and Alfa Romeo, and customised automobiles supplied by Touring Superleggera.

The provision of after-sales services by the Group includes sales of automobile parts and accessories and the Group operates the only authorised service centre in Singapore for all the automobile brands it carries. In addition, the Group also operates an automobile leasing business as an ancillary business that complements its automobile distribution business.

In September 2012, the Group embarked on the luxury watch distribution and retail business and in November 2012, it secured the exclusive distributorship rights for the deLaCour brand of watches for Singapore, Malaysia, Indonesia, Thailand and Brunei.

CSE Global - Latest Quarterly Summary (May 2014)

CSE records 1Q 2014 NET PROFIT OF $7.5M
• Receives new orders of $73.4m in 1Q 2014
• Healthy outstanding order book of $207.4m at end of 1Q 2014
• Generates operating cash inflow of $5.9m in 1Q 2014
• Strong 1Q 2014 net cash position of $44.2m v/s $31.7m net debt in 1Q 2013
• Outlook: Directors optimistic of prospects in FY 2014

Singapore, 12 May 2014 – CSE Global Limited (“CSE” or the “Group) announced today that its financial results for the three months ended 31 March 2014 (“1Q 2014”).

The Group recorded profit after tax of S$7.5 million in 1Q14, compared to S$8.6 million of the continuing operations for 1Q13 (which exclude profit from the CSE-UK divested in December 2013) was 12.1% lower than in the prior year.

The Group’s revenue was 3.5% lower and the profit after tax and non-controlling interests was 12.1% lower in 1Q14 when compared to 1Q13 mainly due to the startup delay in projects that impacted operations in the Americas. The Group’s gross margins and profits after tax before non-controlling interests were 27.5% and
8.6% for 1Q14 compared to 28.0% and 9.2% for 1Q13 respectively.

The basic earnings per ordinary share was 12.1% lower compared to the basic earnings per ordinary share from continuing operations in 1Q13 of 1.66 cents. The Group continues to generate an operating cash inflow of S$5.9 million in 1Q14. The Group made a special dividend payment of 28.0 cents per share, totalling
S$144.5 million in January 2014. The Group ended the quarter with a net cash position of S$44.2 million. Group net gearing was 12.9% as at 1Q13.

In 1Q14, the Group continues to receive new orders from small greenfield and brownfield projects, totaling S$73.4 million. Outstanding orders decreased by 20.7% to S$207.4 million as at end of 1Q14 from S$261.5 million as at end of 1Q13.

Commenting on the Group’s 1Q14 performance, Mr. Lim Boon Kheng, Group CEO of CSE, said, “The startup delay in projects in America has impacted our Group performance. However, the Asia-Pacific region has performed well to cushion this impact. Our gross margins remain steady and our cashflow generation continues to be healthy. ”

On the outlook, Mr Lim added, “In 1Q14, we continue to receive a healthy order intake of $73.4 million We have already started implementing strategies to focus on small greenfield and brownfield projects to drive our growth going forward.”

Concurrently, CSE will continue to implement measures to improve ongoing financial and operational efficiencies and effectiveness which will enable it to carry on enhancing bottom-line. CSE has a healthy outstanding order book of $207.4 million and a net cash position of $44.2 million at end of 1Q14.

Against this background, the Directors are optimistic of its prospects for FY2014.

My Opinion

At price 59 cents, the expected PE is about 10 times and I believe it is still a quite fair valuation to CSE Global. With net cash position, I believe there is no issue for group to undertake more projects, but do take note on decreasing gross profit margin as well as the revenue growth. Nonetheless, let's monitor how the company progresses as the directors are optimistic of FY2014 prospect.

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F&N - Road Show with CLSA Summary - June 2014

After the bidding war of APB (holding company of Tiger beer) finished, the F&N company which is now a subsidiary of Thai Beverages had gone through a series of leadership restructuring and divestment of property division and now it is focusing on beverages especially non-alcohol beverages division. The latest news was to acquire a company in Malaysia to further expand its product range and distribution network to South East Asia countries.

F&N has several brands under itself, which includes but not limited to:

  • F&N
  • 100 Plus
  • Seasons
  • NutriTea
  • FruitTree
  • Magnolia
  • NutriSoy
It is a leading soft drinks & dairy company mainly in South East Asia (Malaysia, Singapore, Thailand etc), achieved S$2.3 Billion sales in FY2013 and EBITDA S$270 Million and has market cap of more than US$3 Billion.

Below are some of the snapshots from presentation slides of road show: 

Top 10 Listed Food and Beverage Companies in SEA

My Opinion

With expected PE of near 30 X (excluding fair value gain of investment properties or other non-recurring items), I think F&N is a bit over valued given current market shares price. It is good if we could purchase the shares at below S$2.00.

13 June 2014

Del Monte Quarterly Result Summary - June 2014

For the transition period between Jan-Apr’14, a net loss of US$42.8m was incurred, reversing profit of US$6.6 Million, mainly due to one-offs relating to the purchase of Del Monte Foods which was completed on 18 Feb’14. Excluding US$46.7 Million non-recurring items, adjusted profit would have been US$3.8 Million. 

Consolidated revenue grew three-fold to US$379.2 Million, of which US$292 Million was contributed by Del Monte Foods (DMF). Zooming in to Asia Pacific operations, revenue fell 24.2% on weaker Philippines sales, offset by strong S&W sales.

Gearing has increased from 67.2% to a hefty 746.3%. In a note by MKE last year, management indicated that the near term focus will be on paring down debt, as such payout will likely be 33% instead of 75% in previous years.

Management expects to generate higher recurring earnings in FY15 as it drives sales and optimizes synergies.

My Opinion
  • It is time for the group to reduce the debt level, hence the dividends to shareholders would be reduced for several years 
  • We have not seen the synergies yet after the acquisition, it may take some time for the group to further consolidate the operation efforts in order to increase gross profit margin as well as the net profit margin

Ezion - S$150M Fixed Rate (4.875% - 6.875%) Notes due 2021 - June 2014

Ezion Holdings Limited (the “Issuer”) is pleased to announce that it has issued S$150,000,000
fixed rate notes due 2021 (the “Series 007 Notes”) under its S$1,500,000,000 multicurrency
debt issuance programme (the “Programme”). The Programme was established on 9 May 2012
and the size of the Programme was increased to S$1,500,000,000 on 8 May 2014.
DBS Bank Ltd. acted as the sole dealer in relation to the issue of the Series 007 Notes.

The Series 007 Notes will bear interest from, and including, 11 June 2014 to, but excluding, 11
June 2018 at 4.875 per cent. per annum and if not redeemed, will bear interest from, and
including, 11 June 2018 to, but excluding, 11 June  2021 at 6.875 per cent. per annum. The
Series 007 Notes will mature on 11 June 2021.

Under the terms and conditions of the Series 007 Notes, the Issuer may, on giving not less than
30 nor more than 60 days’ irrevocable notice to the holders of the Series 007 Notes, redeem all
or some of the Series 007 Notes on any of 11 June 2018, 11 December 2018, 11 June 2019, 11
December 2019, 11 June 2020 or 11 December 2020.

The net proceeds of the Series 007 Notes will be used by the Issuer to fund the proposed
tender/repurchase of its existing S$100,000,000 5.25 per cent. Notes due 2015 (ISIN:
SG6V18981831) and for general corporate purposes, including the financing of investments in
offshore and marine assets and general working capital of the Issuer or its subsidiaries.
Approval in-principle has been obtained for the listing and quotation of the Series 007 Notes on
the Singapore Exchange Securities Trading Limited (“SGX-ST”). The SGX-ST assumes no
responsibility for the correctness of any of the statements made or opinions expressed or
reports contained herein. Approval in-principle for the listing and quotation of the Series 007
Notes on the SGX-ST is not to be taken as an indication of the merits of the Issuer, the
Programme or the Series 007 Notes. The Series 007 Notes are expected to be listed on the
SGX-ST on 12 June 2014.

Source: Company

Some Keynotes:

  1. This was the first time Ezion to issue new debt under the enlarged MTN programme since year 2012, as it is part of the exercise to "refresh" the debt due 2015 (for S$100M 5.25% notes)
  2. It is expected to to further enhance liquidity of company to engage more projects for "lift boats" 
  3. Company share price was in the sideline as the company faced difficulties in delivering the liftboats (some of the projects would face some delay). I believe it will regain the speed of deployment once the issues were resolved
  4. For long run, the group normally would like to have optimal debt-equity structure of 2:1 for those "lift boats" projects if I am not mistaken. As you could see, the group also like to grow its business via investing in other associated companies / strategic partners
  5. At the market price of S$2.15, I believe the group is in reasonable or slightly undervalued price range. 

10 June 2014

Keong Hong - Bonus Shares - June 2014

Keong Hong is a construction company listed in Singapore Catalyst Board. It started the venture into property development sector via joint ventures with established developers by taking construction works as part of the business agreement.

As Singapore property market was experiencing a cool down this year (especially the latest cooling measurement - Total Loan Servicing Ratio that immediately shut down the doors for those who rely on variable income instead of fixed income), we have noticed that more developers venture into oversea market especially Australia / China / UK / other Asean countries.

As a Singapore based company, Keong Hong also took a move to venture into oversea market such as Maldives. I was quite surprised that how would a small size company could clinch a construction project in Maldives and later on had business agreement with Maldives government to build and lease resort development project there (Notwithstanding I believe the net earnings generated would be small percentage compared to total net earnings).

Secondly, as it is now getting more joint ventures with other developers (about 10% - 20% stake), the future gross profit margin is set to be higher than current level. Furthermore, it also had a JV of hotel development in East Coast in Singapore which I believe would bring in recurring income in future. This is a good move to me as it would enhance the profit visibility and be a catalyst for future PE adjustment.

Company was proposing a bonus shares issue of every 1 share to 2 shares for shareholders and to be executed by this month. It would enlarge the outstanding number of shares as well as liquidity in the market. However, it would not change the fundamentals of shares as all the financial ratio would remains the same. For example, if you are given 1 bonus share for 2 shares that you hold, your total value of investment remains the same, as the market price would be adjusted according to it (e.g. 63 cents would be adjusted to 42 cents after the exercise of bonus shares).

09 June 2014

PE Ratio - Good Indicator for Shares Investment?

One of the indicators that I would put it into my stock screening is PE ratio, which is Price / Earnings Per Share ratio. Why this is my preference?

If you look at PE ratio, there are two key elements: Share Price and EPS. As long as we could purchase the shares at lower price tag, the better potential return we could get in later years. But now, we have to be very careful on determining EPS as EPS is not as simple as you thought.

EPS is derived from net earnings divided by average outstanding shares and both are calculated using accounting standards that could be manipulated by the company. First of all, if there is any corporate action during the financial year, for example bonus shares or private placement / warrant exercises etc, the average outstanding shares could be misled as it is always under estimated by using average method. So, I would use number of outstanding shares at the end of financial reporting period instead.

Secondly, there are many items in between top line and bottom line of income statements. We should exclude all the non-recurring items in calculating underlying net earnings, for example gain from disposal of subsidiaries / investment etc.

There are also other incomes that would make up a big stake in bottom line of income statements, such as fair value gain of investment properties (from property developers) / biological assets (from plantation players) / derivatives gain (etc. hedging from hedging currency risks normally implemented by multi-national companies) etc. We need to make our own judgement so that those income could be normalized or re-calculated using more conservative method.

FRS115 method also allows the net earnings of property developers fluctuate, as earnings and revenue of industrial / commercial projects / Executive Condominiums could only be recognized upon TOP. This also may lead to volatility of future earning power of the company as well as the share price.

So, in summary, we may also need to do our own calculation before deriving the underlying net earnings and EPS so that we could have better picture of the PE ratio (as well as future PE ratio) as we are investing in long run.

08 June 2014

Insurance Towards More Investment

A couple of days ago, I read an article regarding a smart investor who can easily earn about 8% compound annual return rate for more than 10 years but buying a so called "hybrid" insurance cum investment product. According to him, he just need to make a 5 years lump sum payment of RM50K and then he can enjoy a series of so called "pension" money for every year for next 20 years and the total money received is about 2 times of all money he paid for the insurance premium. Besides that, he can have amount of about nearly 80% of total money received covered if he passed away. He is quite happy with that arrangement as this is a product that brings him two benefits:

1. Insurance Covered
2. Investment Made

No doubt, this is a good product introduced to people who is not investment savvy and "save" savvy. This is a kind of product that forcing people to save the bulk of money to invest it in insurance product that also give you benefit of amount of insurance covered in case you pass away. But for a guy who can earn 8% annually, the suggestion to him is to separate the amount to:

1. Buy a Term Life Insurance or just a rider that protect part of his life span (especially to protect his future earning power during his working period until 60s and so that his dependencies wont get into trouble. At least his kids now can live until completing their college studies)
2. Invest it in prudence way and so that he can still enjoy a 8% investment return for another 20 - 30 years.

I believe that for many people who bought or buying insurance products, they are easily confused by the features of the insurance product introduced to them. To boost up earnings of the insurance company, many of the insurance companies trying to come out with new features product that can beat other products in the market. As time goes by, more and more complicated products are created by the financial professionals to give more benefits / features to policy holders.

So you would understand why financial education is important to most people for making changes in their life (especially their life after retirement).

05 June 2014

Yang Zi Jiang - Investor Confidence Lost - June 2014

Yang Zi Jiang share price plunged after the executive chairman Mr Ren has been accused of making illegal actions against the company that he has invested into since beginning of this year. The company later announced via SGX website that it is unreal news and would take any legal action to protect Mr. Ren on this issue.

Yang Zi Jiang is by far one of the best if not the best S-Chip performer with long year track records. It has been started off from humble ship builder to current one of the Top 3 private ship builders in China. It just began its strategy plan to diversify its business to venture into Finance & property development.

Whether the allegation is real or unreal, it has indeed give damage to Mr. Ren. We hope that we could get a clear picture as time moves on.

Johor to Decide Implementing Friday Holiday for Private Sector As well?

Since beginning of this year, Johor public sector weekend holiday is set to Friday to Saturday while private sector is not following suit. Since then, there are a lot of complaints from parents that they are lacking time spending with their kids as most of them are working in private sectors. The only available weekend they can spend together falls on Saturday, and it has given some negative impact to food & beverage industries and other retailers.

Due to the inconvenience caused so far, Johor Sultan has advised State government to re-study the case now and it may now push private sector to standardize weekend holidays to both Friday and Saturday. This would be a surprise move for Johor government to do so as it may create another inconvenience especially to Banks & SMEs that have businesses with other states / countries which working days are from Monday to Friday. 

My concern is that whether private sectors would be "forced" to adopt this and whether it could bring any benefits to Rakyat especially those who live in JB and working in Singapore. Would it also dampen demand of property price of Iskandar Malaysia after Sultan announcement of putting a cap price of foreigner purchase price of RM 2.0 Million or about S$ 775K? Let's see what would happen so far as I guess there is some conflicts of interest in between central government lead by Najib and state government which is now more influenced by Johor Sultan. 

So far, property market in Iskandar Malaysia still supported by locals as well as people who are working in Singapore. If and only if infrastructure between JB and Singapore can be improved further, otherwise we may see a lot of "white elephant" projects here. So far, only certain area receives popular demand such as Tebrau, Nusajaya (Bukit Indah nearby), Medini, Skudai, and Danga Bay etc. Large parts of properties are supported by those who are willing to travel in between JB and SG for working & living purpose as there are still lacking quality jobs here as compared to Singapore. 

Current situation is getting worse as Singapore government is tightening the security policy for those who traveling across the causeways and we so far have no concrete idea when/ where would the "MRT" linked to Johor Bahru. Let's pray hard and hopefully we would receive any good news by end of this year. 
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