Saturday, March 31, 2018

SIA Engineering

SIA Engineering -

These are my thoughts on SIA Engineering Company.
SIA Engineering Company (SIAEC), together with its 25 joint ventures and subsidiaries across 8 countries, form the SIAEC Group. The SIAEC Group provides extensive maintenance, repair and overhaul (MRO) of aircraft to more than 80 international airlines worldwide. At Singapore Changi Airport, SIAEC also provides line maintenance services to more than 50 airlines passing through Singapore. quote : jeremyowtaip.

I looked at the most recent statement by the chairman of the group in the 2016/17 annual report as well as the 9M 2017/18 financial report and noticed that there were recurring comments about their MRO services facing challenges and competition due to the newer aircrafts with advanced technology require less frequent maintenance. But the group is doing it’s best to innovate and upgrade the technology of their services to better fit the requests of their customers. Also, they continue to form strategic joint ventures and partnerships with other players to improve their overall competitiveness.
With this backdrop, we shall look into how the various financial metrics have performed over the past 7 years. The 7-year period taken is from April 1 2010 to March 31 2017 as the financial year for SIAEC ends in March every year.
The revenues have grown at a compounded annual growth rate (CAGR) of 1.34% over the past 7 years. The operating profits have decreased over the past 7 years. The profits attributable to shareholders of company have also decreased over the past 7 years (excluding any irregular non-recurring divestment gains on disposal of investments in subsidiaries, joint ventures and partnerships). The operating profit margins have decreased from 11% to 6.5% over the past 7 years. The profit attributable to shareholders margins have decreased from 23.5% to 17.3% over the past 7 years. The diluted earnings per share have also decreased from 21.8 cents to 17 cents (excluding divestment gains from disposal of investments in joint ventures and partnerships) over the past 7 years. It seems that the profitability of SIAEC has dropped over the past 7 years. Indeed, it is currently experiencing challenges and competition in the MRO services space resulting in the drop in profitability.

Total Revenue - is the sum of cash inflows, increase in operating accounts such as receivables and occasionally, unrealized gains generated in the course of Company's Business activities.

Let’s look at their balance sheet financial strength in terms of various metrics. I will compare the figures 7 years ago in March 2010 against that of most recent FY ended in Mar 2017.

The debt-to-equity ratio (D/E) is a financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets. Closely related to leveraging, the ratio is also known as risk, gearing or leverage.
Borrowing money for business all along to me is a double edge sword. If use well you grow fast and prosper. Some industries are highly capital intensive so borrowing lots of money is the only way to be in business or for expansion.

Debt to equity ratio = 0.00005 (2010) vs 0.017 (2017)

Current ratio = 3.08 (2010) vs 3.51 (2017) . It measures the company's ability to cover current debts with current assets.It it calculated by dividing total current assets by total current liabilities.

Quick ratio = 1.77 (2010) vs 2.15 (2017) . It measures the company's ability to cover current debts with liquid current assets. It is calculated by dividing the sum of the cash, short term investments, and account receivable by total current liabilities.

The balance sheet of SIAEC is very strong with high levels of working capital maintained throughout the past 7 years with very minimal or almost no debts carried on it’s balance sheet.
Let’s look at their cashflows trend over the past 7 years. Operating cashflows have grown at a CAGR of 2.62% over the past 7 years. Free cashflows have grown at a CAGR of 6.67% over the past 7 years. It seems that even though the operating cashflows have only grown at a low compounded growth rate, the company is able to grow the free cashflows at a much higher compounded growth rate. This could be due to lower capital expenditure requirements over the past 7 years that have resulted in more free cashflows generated.

Could that be also suggestive that the company has not been able to invest more cash into more potential areas of growth over the past 7 years resulting in the capital expenditures which have not grown even while operating cashflows have grown at a low rate? This also is shown in the dividend payout ratio which have maintained at high payout ratios of 70% and above for most of the past 7 years. It seems the company is not having much retained earnings to further grow it’s businesses but is seen to be giving out most of it’s earnings to shareholders in the form of dividends.
Let’s look at the management efficiency in their returns on assets, equity and invested capital over the past 7 years. The various returns show a declining trend over the past 7 years with the latest returns on assets, equity and invested capital being around 9.1%, 11.4% and 11.1% respectively. Thus, we see that management efficiency has declined over the past 7 years.

ROA - is a measure of company profitability relative to total assets. It is calculated by dividing Tax Effective EBIT ( earning before interest and tax) by average total assets over a twelve months period.

ROE - is a measure of company profitability relative to total equity. It is calculated by dividing Tax Effective EBIT ( earning before interest and tax) by average total equity over a twelve months period.

Now, let’s look at the fair valuation for SIAEC. For the worst case scenario if the operating environment continues to be challenging and competitive and SIAEC is not able to overcome the challenging operating environment, I am assuming a CAGR of only 2% in their diluted earnings per share for next 7 years. Using my method of estimation, their fair share price works out to be around $2.25. However, on a best case scenario should they be able to overcome their challenging operating environment, assuming a CAGR of 4% on their diluted EPS for next 7 years, their fair share price works out to be around $2.97. The share price of SIAEC is currently $3.18 which is slightly overvalued even if we factor in the best case scenario of fair share price at around $2.97.
These assumptions I think are fair as SIAEC has been experiencing falling profitability and returns over the past 7 years. Even if they can reverse this trend, their growth rates going forward may not be significantly high anymore. This could be also due to them being a large matured company and thus their growth rates going forward may continue to be non-impressive. Investors looking at SIAEC will be more rewarded with good dividend yields supported by it’s recurring strong free cashflows rather than capital growth in the share price. This is because SIAEC is no longer a high growth company as it used to a decade and more ago based on it’s past decade performance it has put out which shows that it has been slowing down it’s growth it seems.
SIAEC has been doing quite frequent share buybacks in recent years to stem the fall in it's share prices. However, the only long term solution to reverse the trend of it's gradually falling share prices is to improve it's profitability and returns. If not, no amount of share buybacks will be able to stem the trend of their gradually retreating share prices as share buybacks are only a temporary measure which cannot work forever as it is an artificial means to dress up falling profitability and returns. The fundamentals of a business will still eventually exert the heaviest weight to determine the long term performance in the share prices. Short term dressing up of share prices and performance metrics may make a company still look good for a while but it is not going to last for the long term if business fundamentals are not strong.

From TA point of view, it is still on a long term downtrend mode.
No sign of reversal yet.
It might re-test the recent low of $3.14. Breaking down of this level would not be so rosy and may see further selling down pressure.
As mentioned above, the company has been actively buying back share, therefore, price may likely fluctuate between $3.10 to $3.25..

Not a call to buy or sell.
Please do your own due diligence!

SIA Engineering Company Limited, together with its subsidiaries, operates as an aircraft maintenance, repair, and overhaul (MRO) company in East Asia, West Asia, Europe, South West Pacific, Americas, and Africa. The company operates through Repair and Overhaul, and Line Maintenance segments. The Repair and Overhaul segment provides airframe maintenance, component overhaul, and engine repair and overhaul services, as well as fleet management programs. Its services include scheduled routine maintenance and overhaul, specialized and non-routine maintenance, and modification and refurbishment programs, as well as fleet and inventory technical management services, including engineering and MRO solutions. The Line Maintenance segment offers aircraft certification and technical ground handling services, such as push-back and towing, and aircraft ground support equipment and rectification work services. The company also provides passenger aircraft to freighter conversion, cabin modification, training academy, and aircraft painting services. In addition, it is involved in repairing and overhauling hydro-mechanical aircraft equipment for Boeing and Airbus aircraft. The company was incorporated in 1982 and is based in Singapore. SIA Engineering Company Limited is a subsidiary of Singapore Airlines Limited.

Chip Eng Seng

Chip Eng Seng - from TA point of view , it is on a Uptrend mode ! Looks bullish, and may likely continue to head higher.
Likely to retest the phycological price level of $1.00. Breaking $1.00 smoothly may likely test $1.04/$1.05 which is the major overhead resistance

It might be good to take a fifo basis. It could be a challenge to breakthrough this major resistance!
Not a call to buy or sell.
 Pls do your due diligence!

 Looking through the financial results for past 5 years , it seems that the Net profit figure has came in lower from 73.7m (2013) to 35.5m(2017). Next , we take a look at the Ops cash flow and it seems that they have negative cash flow level. You may want to take note of this.
NAV of $1.247.
EPS of 5.7 cents.
PE of 17X
Dividend of 4 cents,yield if 4%..

Price seems to be trading at full value. Dyodd.

Chipp Eng Seng Corporation Ltd, an investment holding company, engages in the construction, property development and investment, and hospitality businesses primarily in Singapore, Australia, Malaysia, Vietnam, and Maldives. The company operates through Construction, Property Developments, Property Investments, Hospitality, and Corporate and Others segments. The company constructs public housing projects, modular buildings, condominiums, and executive condominiums, as well as industrial and commercial projects; develops residential, commercial, and industrial properties, as well as manages development projects; and provides real estate management and consultancy services. It also leases investment properties, such as shophouses, and commercial and industrial properties; operates hotels and island resort; engages in treasury functions; and invests in marketable securities. In addition, the company acts as general building contractor; manufactures and trades in precast products; and provides general building engineering services. Chip Eng Seng Corporation Ltd was incorporated in 1998 and is headquartered in Singapore.


Valuetronics - Was experiencing a spiked in price last Thursday whereby the price was opening higher at $1.04 and went up to a high of $1.10 before profit taking set-in and close lower at $1.08. The volume was not  impressive you may like to take note off.

It is still trading on a Uptrend mode as can be seen that the price is hovering above the SMA lines. MACD is still on a rising mode. Looks positive to continue to trend higher.

It may likely re-attempt to re-capture the recent high of $1.12. Crossing over with ease + good volume, that may propel to drive the price higher towards $1.20 then $1.25 with extension to $1.30.

NAV of 0.403.
Rolling EPS of 8.2 cents.
Rolling PE of 11.62 times.

P/B of 2.4 times.

Total Revenue is not consistently increasing as can be seen from the past  5 years financial results, total revenue has been fluctuating up & down between 338m to 486m.
With the current FY 2017 achieving a higher Total revenue of 486m.

Total net income has seen a great improvement from 23.9m to 34.43m. An increase of about CAGR  8.8% for past 5 years. A single high digit grow.

Diluted EPS has slightly improve from 4.2 cents in 2013 to 5.7 cents in 2017. A single high digit grow at CAGR 7.7 %.

Dividend has been more or less maintained around 2 cents to 2.7 cents. Yield is about 2.5% which is considered quite low and not very attractive.
Comparing to Other Tech counter like Sunningdale Tech which is giving a total dividend of 7.5 cents and is giving a yield of almost 4%.

Valuetronics is having a net net position as can be seen from the Balance sheets items, total current assets of 316.7m is more than sufficient to cover the total liabilities of 191.3m.

Ops cash flow has generally gone lower which you may like to take note off .

Return of assets is only achieving a single digit grow of 6.9% .
Return of equity is maintaining well at above 20%.

Net income margin of about 7.1% is also not very impressive.

Not a call to buy or sell.

Valuetronics Holdings Limited, an investment holding company, provides integrated electronics manufacturing services (EMS) in the United States, the People's Republic of China, Poland, Canada, the Netherlands, and internationally. It operates in two segments, Consumer Electronics (CE), and Industrial and Commercial Electronics (ICE). The company provides EMS services to CE and ICE products covering smart lighting products, printers, temperature sensing devices, communication products, automotive products, and medical equipment. It offers design, engineering, manufacturing, and supply chain support services for electronic and electro-mechanical products; and original equipment manufacturing services, including PCBA and box-build assembly, as well as original design manufacturing services. The company’s design services include mechanical design; plastic tool design; electronics, RF, and software designs; regulatory compliance engineering and testing; and product test development services. Its manufacturing services comprise plastic tool fabrication and injection molding; metal stamping and machining; printed circuit board assemblies, including complex multi-layer boards; sub-assemblies and full product assemblies; reliability engineering and testing; quality systems; materials procurement; and on-site program management services. The company’s supply chain support services comprise shipment of products to final destinations; product customization and drop shipment; warranty and non-warranty repairs; spare parts inventory and shipment; and direct fulfillment programs. It also holds properties; provides trading and business services; and manufactures diagnostic equipment. The company serves multinational and mid-size companies in the telecommunications, industrial, commercial, and consumer sectors. Valuetronics Holdings Limited was founded in 1992 and is headquartered in Shatin, Hong Kong.

Thursday, March 29, 2018

Best World

Best World - After touching the low of $1.17 on 14th Feb 2018 , it has since stage on a strong recovery and rises higher to touch $1.90 on 19th Mar 2018, this is rather bullish.

It is now on a uptrend mode and is looking positive to continue to trend higher.
The current price of $1.84 has bounce-off from the lower Trend Line of this uptrend mode direction. This is rather positive. The price is also staying above all the Moving Average of 20,50,100 & 200.
Looking good to rise to re-attempt the recent higher of $1.90. We will need a strong volume to drive the share price higher and cross the immediate resistance of $1.90 smoothly in order to scale higher.

Not a call to buy or sell.

Best World International Limited develops, manufactures, and distributes skincare, personal care, nutritional, and wellness products. The company operates through Direct Selling, Export, and Manufacturing/Wholesale segments. It offers inner harmony products, including Avance for digestive health, circulatory health, natural resistance, rejuvenation, and oral care; and Optrimax weight management products. The company also provides outer harmony products, such as DR’s Secret range of products for complexion; Miraglo that removes impurities on the skin surface; Aestier for wrinkles, fine lines, and loss of firmness; and PentaLab personal care products. In addition, it offers lifestyle harmony products comprising ÜberAir, a series of air-enhancing equipment. Further, the company manufactures and distributes the Aurigen line of supplements through drugstores. It operates in Singapore, Thailand, Taiwan, Indonesia, Malaysia, Vietnam, Hong Kong, China, Korea, the Philippines, Myanmar, and Dubai. Best World International Limited was founded in 1990 and is headquartered in Singapore.

From the Financial results for past 5 years , we can notice that the Total Revenue has been increasing at an amazing speed of $41.08m in 2013 to a high of $220.87m in 2017. An increase of almost 5.4 times of the total revenue being achieved in 2013. Wow! What a spectacular performance.

Next in line, we can see that the Net Income has also been greatly improved at a higher magnitude of CAGR of 700% from $1.43m in 2013 to $55.67m in 2017. This is a superb turnaround with outstanding achievement.

The dividend paying out has also been generally increased from 0.001 cents to 4.1 cents. Although the dividend yield is quite low, but this is considered a growth counter and i think the share price may rise faster than the dividend yield.

The company is on a net net position as can be seen that the Total current assets of 171.974m is more than sufficient to cover the total liabilities of 63.047m.

The Ops cash flow has achieved with a great healthy performance of 0.712m generated in 2013 to a high of  57.211m in 2017.  Net change in Cash has also been doing well from 5.03m in 2013 to a high of 24.26m. 

Return of Assets and Return of Equity has been greatly enhanced from single digits grow to a double digit grow.
Net income margin has staged a strong improvement from 3.57% to a high of 25.21%.

Rolling EPS of 10.1 cents, PE of 18.7 times , Nav of 0.235 . 

For a growth counter , i would roughly pack the average PE of 22-25 times.
if base on PE 22 times - Target Price would be $2.20.
If base on PE 25 times - Target Price would be $2.50.

Best World - The best is yet to be..

Do take note that if there is any change in market condition may affect the price going forward.

(Trade/invest base on your own decision)

Duty Free Intl

Duty Free International Limited, an investment holding company, trades in duty free merchandise under the Zon brand in Malaysia. The company wholesales, distributes, and retails duty free and non-dutiable merchandise, including imported duty free beverages, tobacco products, chocolates and confectionary products, perfumes, cosmetics, and souvenirs. It operates duty-free retail outlets/complexes and trading outlets located at various locations in airports, seaports, ferry terminals, border towns, and tourist destinations. Duty Free International Limited is also involved in the development of resorts; property investment and management activities; cultivation of oil palms; and sale of fresh oil palm fruit bunches. The company was founded in 1978 and is based in Singapore. Duty Free International Limited is a subsidiary of Atlan Holdings Bhd.

The share price has been falling off from the high of 44 cents to a low of 22 cents on 29 Mar 2018.Down 50%. Which is deemed as overly done. The selling down may be due to the pending court case for tax related matter. I think the total amount for the tax is about RM41m.For actual details pls refer to Sgx/company announcement . Looking through the announcement even if they have to include this tax amount their current cash-on-hand would be easily able to cover this tax amount. They have RM276.4m as reported on 9 mth financial results.

Looking through the Balance Sheets items: For one can notice the Current Assets has a total value of RM518.859 versus their Total Liabilities of RM107.513m. A Net Net position value of 4.83 times.

Their cash flow generation has been pretty healthy The average dividend for past years is about 1.8 cents . Which is giving a yield of 8.18% base on current price of 22 cents. As at to date the dividend being payout is 1.85 cents for first nine months . I think the company would be able to continue in paying out the dividend.. I am vested on this counter and would wait patiently wait for the announcement to be made known in the near future. Not a call to sell or buy. Pls do your own due diligence. (Trade/invest bas on your own decision)


Bank counter

The three local bank counters looks rather bearish from TA point of view.
It is experiencing a heavy selling down as can be witnessed from the chart with the current price hovering below the 20MA.
The current price is also fluctuating near the lower Bollinger Bands which could be an indication of a further breaking down at current level.

I think it is good to be extra cautious as today is also the last trading day for the month of March 2018 which could be a window dressing effect .

For DBS, we will need to watch-out the recent low price level of  $26.86. Breaking down of this level would be super bearish and may see further selling down pressure for price to go lower towards $26.00 with extension to $25.00.
DBS - NAV $17.80.
P/B - 1.61
PE of 17.23

As for UOB, we will need to look out for the recent low of  $27.09 price level. Breaking down of this level would likely see the price slide down towards $26.50 with extension to $25.70.

UOB - NAV $20.376
P/B - 1.336
PE of 13.74 times

Last but not least, for OCBC we will need to monitor that the price does not scale below its recent low of $12.57 level. Breaking down could see it $12.00 with extension to $11.50.

OCBC - NAV $8.96 .
P/B is 1.43 .
PE of 13.14 times

Not a call to sell or buy.

DBS Group Holdings Ltd provides various commercial banking and financial services in Singapore, Hong Kong, rest of Greater China, South and Southeast Asia, and internationally. It operates through Consumer Banking/Wealth Management, Institutional Banking, Treasury Markets, and Others segments. The Consumer Banking/Wealth Management segment offers banking and related financial services, including current and savings accounts, fixed deposits, loans and home finance, cards, payments, investment, and insurance products. The Institutional Banking segment provides financial services and products, such as short-term working capital financing and specialized lending; cash management, trade finance, and securities and fiduciary services; treasury and markets products; and corporate finance and advisory banking, as well as capital markets solutions. This segment serves institutional clients comprising bank and non-bank financial institutions, government-linked companies, large corporates, and small and medium-sized businesses. The Treasury Markets segment is involved in structuring, market-making, and trading across a range of treasury products. The Others segment offers Islamic banking services. The company operates approximately 280 branches across 18 markets. DBS Group Holdings Ltd was incorporated in 1968 and is headquartered in Singapore.

United Overseas Bank Limited provides financial products and services. The company’s Group Retail segment provides deposits, insurance, card, wealth management, investment, and loan and trade financing products for personal and small enterprise customers. Its Group Wholesale Banking segment provides financing, trade, cash management, capital markets solutions, and advisory and treasury products and services. The company’s Global Markets segment offers foreign exchange, interest rate, credit, commodities, equities, and structured investment products; and manages funds and liquidity. Its Other segment provides investment management, property, and insurance services. The company has a network of approximately 500 offices in 19 countries and territories in the Asia Pacific, Europe, and North America. The company was formerly known as United Chinese Bank and changed its name to United Overseas Bank Limited in 1965. United Overseas Bank Limited was founded in 1935 and is headquartered in Singapore.

Oversea-Chinese Banking Corporation Limited provides financial services in Singapore, Malaysia, Indonesia, Greater China, other parts of the Asia Pacific, and internationally. The company's Global Consumer/Private Banking segment provides a range of products and services to individuals, including checking accounts, and savings and fixed deposits; consumer loans, such as housing and other personal loans; credit cards; wealth management products consisting of unit trusts, bancassurance products, and structured deposits; and brokerage services. This segment also offers private banking services, including investment advice and portfolio management, estate and trust planning, and wealth structuring services. Its Global Corporate/Investment Banking segment provides project financing, overdrafts, trade financing, and deposit accounts; fee-based services, such as cash management and custodian services; and investment banking services, including syndicated loans and advisory services, corporate finance services for initial public offerings, secondary fund-raising, and takeovers and mergers, as well as customized and structured equity-linked financing to institutional customers, such as corporates, public sector, and small and medium enterprises. The company's Global Treasury and Markets segment is involved in the foreign exchange activities, money market operations, and fixed income and derivatives trading, as well as provision of structured treasury products and financial solutions. Its OCBC Wing Hang segment offers commercial banking, consumer financing, share brokerage, and insurance services. The company’s Insurance segment provides fund management services, and life and general insurance products. Its Others segment is involved in property and investment holding activities. It operates a network of approximately 600 branches and representative offices in 18 countries and regions. Oversea-Chinese Banking Corporation Limited was founded in 1912 and is based in Singapore.

Wednesday, March 28, 2018

Raffles Medical & Sheng Siong

Dow and STI Market may be experiencing a volatile situation now. For these 2 defensive counters , I think price might not be affected much with its nature of business. Good or bad time, I think people will still needs to see Doctor /hospital or buy their daily groceries stuff.

Raffles Medical Group Ltd engages in the medical clinics operation and other general medical service businesses primarily in Singapore. The company operates through three segments: Healthcare Services, Hospital Services, and Investment Holdings. Its flagship hospital is Raffles Hospital, a tertiary care hospital that offers services, including emergency, cancer, children and women care, traditional Chinese medicine, counselling, dental, diabetes and endocrinology, dialysis, ear nose and throat, eye, family medicine, fertility, health screening, heart, internal medicine, international patients services, neuroscience, pain management, rehabilitation, radiology, Japanese clinic, orthopaedic, skin and aesthetics, surgery, urology, and nuclear medicine services for inpatients and outpatients. The company also operates 100 medical clinics that provide various services, such as general practice/family medicine, emergency, health check, health screening, immunization, travel health, specialty, minor surgery, X-ray, pre-marital screening, and corporate programs; provides health and related insurance; trades in pharmaceutical and nutraceutical products, and diagnostic equipment; and provides healthcare management and consultancy services, as well as specialized medical, medical laboratory, imaging center, dental, and clinical services. In addition, it owns properties; develops IT solutions; provides advisory and medical emergency assistance services; and sells medical kits. The company was founded in 1976 and is based in Singapore.

Total Revenue has been consistently increasing from $340.99m in 2013 to $477.58m in 2017.The Total Revenue is growing at a CAGR of 8.1%. A single digits high ,of which I think is quite good already. 

Total annual dividend has been quite encouraging as the paying out rate has been increasing from 1.7 cents to 2.2 cents .I thibt share holder would be happy to receive higher

Operation cash flow has been quite healthy as they are able to generate $71.19m in 2013 to $82 .69m in 2017. 

Net income Margin has been generally declining from 24.89% to 14.82% in 2017.
It might be due to higher material /operation costs.

NAV of 40.01 cents.
EPS of 4 cents.
PE of 27.64 times

For RMG, I have two possible fair values depending on how well it can execute it's new expansion and growth of it's Bugis hospital extension and also it's two China hospitals to grow it's EPS.
For the conservative fair value, it is $1.14 assuming a CAGR of 10% on it's EPS for next 7 years. For the more aggressive fair value, it is $1.46 assuming a CAGR of 14% on it's EPS for next 7 years. Thus, any price $1.14 and below is a bargain to me to accumulate shares of RMG.

not a call to buy or sell.
Sheng Siong Group Ltd., an investment holding company, operates supermarkets in Singapore. The company’s stores offer an assortment of live, fresh, and chilled produce, such as seafood, meat, and vegetables; and packaged, processed, frozen, and/or preserved food products, as well as general merchandise, including toiletries and essential household products. It is also involved in general trading, and wholesale import and export businesses. The company operates approximately 43 supermarkets/grocery stores under the Sheng Siong brand name. Sheng Siong Group Ltd. was founded in 1985 and is headquartered in Singapore.
For Sheng Siong, I have two possible fair values depending on how well it can continue to grow it's supermarket business both locally and in China it is now entering.

For the conservative fair value, if we assume Sheng Siong slows down it's business growth at CAGR of 6% on it's EPS, then fair share price is $0.95 which happens to be around the price it is currently traded at.

For the aggressive fair value, if we assume Sheng Siong can continue to grow it's EPS same as past 5 years CAGR of 9.06% without any slowing down in the growth of it's local and China supermarket businesses, it's fair share price is $1.24.
Thus, any price at $0.95 and below to me is ok to accumulate Sheng Siong.

Not a call to buy or sell.

Tuesday, March 27, 2018

HrNet Group

HrNet Group - HRnetGroup Limited, an investment holding company, engages in the recruitment agency business in Asia. The company operates in two segments, Professional Recruitment and Flexible Staffing. It offers permanent recruitment, and temporary and contracted staffing services for financial institution, retail and consumer, information technology and telecommunication, manufacturing, healthcare life science, insurance, and logistic industries, as well as functions, such as human resource, finance and accounting, and legal and compliance industries. The company also provides other services comprising payroll processing, human resources consulting, and corporate training services. In addition, it offers management consulting and advisory services. HRnetGroup Limited provides its services under the HRnet One, Recruit Express, PeopleSearch, SearchAsia, RecruitFirst, PeopleFirst, RecruitLegal, YesPay!, HRnet Performance Consulting, and Young Talent brand names. The company was founded in 1992 and is headquartered in Singapore. HRnetGroup Limited is a subsidiary of SIMCO Ltd.

NAV of $0.309.
Rolling EPS of 4.1 cents.
PE 18.22 times.

Dir has been recently buying back some of the share . You may refer to sgx/announcement.

Total revenue has been generally increasing for the past 3 years from $324m in 2014 to $391m in 2017. This is quite positive.

Strong Balance sheet with Net Net position as can be seen from the financial nos, Total Current Assets of $373m is more than 6 times of the Total Liabilities of $54.69m.
The cash flow has been generally quite healthy.

The Return of Assets is maintaining above 12.8% which is rather impressive.
Similarly, Net Income margin has been constantly achieving above 10% which is rather positive.

I have attached below a write-up from HRnetGroup's corporate website about Heliconia's investment in it. Heliconia is a wholly owned subsidiary of Temasek Holdings. I also took a look at their corporate information on HRnetGroup's website about them. It seems that they have grown much over the past 25 years to become a leading player in the Asian regional recruitment industry.
As EDMW_Capital pointed out, there were the various plans under the 123GROW plan where new shares were issued upon IPO listing. I looked up the IPO prospectus that the aggregate total amount of all the shares that will be issued under the 123GROW plan represents about 1.99% of the enlarged issued share capital immediately following the IPO Offering and the issue of the Cornerstone Shares, assuming that the Over-allotment Option is exercised and maximum number of shares issued under the various plans. Thus, whatever dilution effect from these plans would have already been completed by now after the IPO since this exercise was undertaken upon IPO.
However, there is another plan under 123GROW plan which is HRnet GROW Plan which will be ongoing always which is a share reward scheme to reward good performance and encourage loyalty of employees of HRnetGroup. This may from time to time create minor dilution of shares for shareholders of HRnetGroup. The idea of this is to sort of make employees like a co-owner of the company whereby they can receive shares of the company to reward them for their performance and encourage their loyalty towards the company. Many companies also award such share reward or performance scheme. As long it is not too aggressively done without good basis, I feel such share reward scheme can be virtuous for the company to spur more ownership and performance in the employees of a company. For example, Raffles Medical Group, ST Engineering and Nestle Malaysia Berhad also offer similar share option or share reward scheme to their employees.
Therefore, I think the dilution effect to shareholdings of shareholders for most part of the 123GROW plan has already been factored into the trading of the shares after 9 months since they have been public listed around middle of last year without much unpleasant surprises going ahead.
I did a rough calculation of the diluted earnings yield (inverse of P/E ratio) an investor would be getting from HRnetGroup based on investing at current share price of $0.74. The current earnings yield an investor would be getting is about 5.5%. This is better than parking money in special account of CPF which only gives 4.5% interest yield. The P/B ratio at current share price is about 2.4. At such traded P/B ratios of above 2, investors are expecting the company should be a moderate to high growth company. Based on their IPO prospectus, HRnetGroup has grown at impressive CAGRs over past decades but their CAGR has slowed down in recent few years. If I assume they may still grow conservatively at their recent CAGR of 10% in their diluted EPS attributable to shareholders over the next 7 years, using my method of estimation, their fair share price would be around $1.16.
I also looked at the cashflows of HRnetGroup, their capex requirement is very small as compared to net cash generated from operations. This results in abundance of free cashflows that can be generated every year from their business model which does not require high capex to maintain and grow. As always, if I am keen to invest in any new businesses I discovered, I prefer to invest slowly in stages as I continue to monitor their progress especially for such new IPOs even if it may seem to be a good investment. This is because I may not have a lot of information about newly IPOed companies available to know them very well unlike companies which already have been public listed for a good number of years which I can dig out so much information about them from their long history of being public listed.
HRnetGroup: Announcement of Heliconia Investment :

quote : You may want to look carefully at their IPO prospectus, such as their 123GROW plan, which will result in dilution over the next few years from multiple arrows such as the Opp 1 Investment Shares, Opp 1 Loyalty Shares, Opp 1 Bonus Shares, GLOW Initial Shares, Opp 1 Investment Shares, Opp 2 Investment Shares, the Opp 2 Buy-in Shares, Top-up Issuance Shares and more Bonus Shares, etc...
I think the company is on the hunt of for acquisitions to grow recruitment business regionally.
Fundamentally I think it’s good but market doesn’t agree.

From TA point of view, it is now on a downtrend mode and may likely move down to revisit the all time low of 72 cents.

Looks rather bearish! I think IPO price is about 90 cents. Seems like a interesting price level to take a second look.
I think it may bounce-off from 72 cents and rise up again in time to come.
Not a call to buy or sell.

Saturday, March 24, 2018


Riverstone - Riverstone Holdings Limited, an investment holding company, manufactures and distributes cleanroom and healthcare gloves under the RS brand. It also produces cleanroom finger cots, packaging bags, face masks, and wipers; and other consumables, such as hair nets, static dissipative shoes, safety booties, shoe covers, ESD rubber bands, sticky mats and rollers, swab-polyester and microfibers, antistatic gloves, static dissipative shoes, cleanroom coveralls, and cleanroom papers. In addition, the company trades in latex products; and distributes cleanroom products. Further, Riverstone Holdings Limited offers healthcare products comprising white, blue, black, and accelerator nitrile exam gloves. Its products are used in the hard disk drive, semiconductor, and healthcare industries. The company exports its products primarily to the Americas, Asia, and Europe. Riverstone Holdings Limited was founded in 1989 and is based in Singapore.

looking through their financial nos for the past few years. They are expanding and doing very well in terms of overall Total Revenue has been consistently increasing at a Compounded Annual Growth Rate of 13.96% a double digits grow of Gross revenue which is considered very good.

Gross Profit has been constantly increasing at a Compounded Annual Growth Rate(CAGR) of 20.4% from RM97.8m to RM197.8m. Gross profit margin has been maintaining above 20% at 24.2%. This is rather healthy and superb for a growing company.

Net Profit amount has been generating a high end double digits percentage of Average 18.6%.
What a spectacular achievement. The Net profit amount has seen a great improvement of RM58m from 2013 to RM 129.3m in 2017. It is growing at a CAGR of 24.58%. I would say is an outstanding achievement.

Super Healthy Cash flow generation for the past few years as can be seen from the financial results the Ops cash flow activities has been increasing from RM80.2m to RM145.7m. 

The company has a robust balance sheet of which the total borrowing is about RM25M, Cash on hand is RM114.25m, a net net position company with net cash position of RM89.25m.

Next on to their efficiency. Riverstone's return on assets (ROA) and return on equity (ROE) have maintained well from 2013 to 2017. In fact, I looked at their past trend these two return Metrics and they have maintained well at current levels of ROA (above 13%) and ROE (above 20%). We must realise that it is not easy to maintain the ROA and ROE in any business while it is growing it's assets and shareholders' equity through time. To be able to maintain the same level or even increase the level of ROA and ROE would mean the business has high efficiency. Riverstone just demonstrated their high efficiency in their businesses. If they can continue to maintain these same levels of returns, I will be even much more impressed with them.

ROA - is a measure of company profitability relative to total assets. It is calculated by dividing Tax Effective EBIT ( earning before interest and tax) by average total assets over a twelve months period.

ROE - is a measure of company profitability relative to total equity. It is calculated by dividing Tax Effective EBIT ( earning before interest and tax) by average total equity over a twelve months period.

Investor would be pleased to know that they are able to constantly increasing the paying out of the dividend over the past years as reflected on the chart below. This is a plus factor and a very pleasing way of rewarding the investor.


Phase 4 expansion is now completed with seven production lines fully commissioned, bringing the Group’s total annual production capacity to 7.6 billion gloves

 Phase 5 expansion is now underway with an additional 1.4 billion pieces to ramp up total annual production capacity to 9.0 billion pieces by end FY2018

 Phase 6 expansion to add another 1.4 billion pieces by end FY2019 to 10.4 billion pieces in total annual production capacity

 Non-HDD markets for cleanroom gloves as well as US and Japan markets for both cleanroom and healthcare gloves continue to gain traction

 Continue to tap on fast-growing markets for healthcare gloves

Key Challenges

Competition • Cleanroom: Continue to target new markets and customers •

Healthcare: Focus on customised and premium products Increase in costs such as raw material, labor, and fuel •

Automation • Improve productivity using Lean Six Sigma • Reduce changeover time by installing an additional line

Investment Merits:

Continues to be in expansion mode driven by growth in both clean room and healthcare gloves – 36.8% increase in production capacity by end 2019 to 10.4 billion pieces of gloves

 Resilient balance sheet with net cash position with continued ability to generate positive operating cash flow

Consistent dividend payout since listing

Committed management team

I have roughly workout the intrinsic Ops Cash flow value of $1.25 taking into consideration the CAGR of 16.14%. Discount factor of 4%.
Let factor in the further discount of 0.85 X $1.25 = $1.06.

Dividend of 2.3 cents p.a. Yield is about 2.25%( current price of S$1.02). 
NAV of S$0.282.

The current price of $1.02 is approaching the fair value of $1.06. Giving the fact that the company is growing and has been consistently increasing their total gross revenue and net profit level. looks like it may trade well above the fair value of $1.06. 
I think if there is any further weakness in price, i may consider to slowly accumulate.
Might be anything between 80-90 cents..That may provide a bigger Margin of Safety.

Is hard to debate how many discount factor percentage to use to calculate the intrinsic value. For this healthcare related company, rolling EPS of 5.7 cents, PE of 17.7 times seems quite attractive. Pls dyodd.
Let say the average PE for a healthcare related company might be trading around PE 22 times. We would have come out a Target Price of $1.25.

not a call to buy or sell.