Sunningdale Tech

2nd May :

Dollar turns positive for 2018 before Fed meeting

Nasdaq closes higher as Apple jumps ahead of earnings

• The tech-heavy index closed 0.9 percent higher at 7,130.70 while Apple climbed 2.3 percent.
• Apple, the largest publicly traded company in the U.S., is scheduled to report fiscal second quarter earnings and revenue Tuesday after the close.

Sunningdale Tech first quarter 2018 Net Profit plunges 75% to $1.9m. EPs Of 1.3 cents.


During 1Q2018, the Group suffered foreign exchange losses of S$5.2 million as compared to foreign exchange losses of S$2.1 million for 1Q2017. This was primarily attributed to the depreciation of the US Dollar against the respective functional currencies of the Group’s entities. Excluding the impact of foreign exchange losses, one-off disposal gains and retrenchment costs, the Group’s core net profit declined 25.5% yoy to S$7.1 million.


Despite the slowdown in the Consumer/IT segment during the quarter, there are plans to progressively ramp up production for new projects within this segment that will carry through to the second half of 2018.

Looks like 2nd half may see much better result 
Not a call to buy or sell.
Please do your own due diligence.

 Despite continued improvements to operational efficiency, the Group’s gross profit declined 17.2% yoy to S$21.4 million while gross margin declined to 12.7%. This decline was due primarily to lower utilisation levels as a result of lower orders in the Consumer/IT segment.

Furthermore, if exchange rates had remained the same as 1Q2017, the Group would have reported an additional S$2.8 million gross profit while gross margin would have been at 14.0%.

(S$'000) 1Q2018 1Q2017  Change Profit for the period 1,940 7,698 (74.8)% Adjustments:    Foreign exchange loss 5,205 2,123 n.m. Retrenchment costs - 113 n.m. Gain on disposal of PP&E (36) (387) n.m. Core net profit 7,109 9,547 (25.5)%

  Despite continued improvements to operational efficiency, the Group’s gross profit declined 17.2% yoy to S$21.4 million while gross margin declined to 12.7%. This decline was due primarily to lower utilisation levels as a result of lower orders in the Consumer/IT segment. Furthermore, if exchange rates had remained the same as 1Q2017, the Group would have reported an additional S$2.8 million gross profit while gross margin would have been at 14.0%.  (S$'000) 1Q2018 1Q2017  Change Profit for the period 1,940 7,698 (74.8)% Adjustments:    Foreign exchange loss 5,205 2,123 n.m. Retrenchment costs - 113 n.m. Gain on disposal of PP&E (36) (387) n.m. Core net profit 7,109 9,547 (25.5)%  During 1Q2018, the Group suffered foreign exchange losses of S$5.2 million as compared to foreign exchange losses of S$2.1 million for 1Q2017. This was primarily attributed to the depreciation of the US Dollar against the respective functional currencies of the Group’s entities. Excluding the impact of foreign exchange losses, one-off disposal gains and retrenchment costs, the Group’s core net profit declined 25.5% yoy to S$7.1 million.  The Group continued to generate strong positive operating cash flows of S$6.9 million for 1Q2018. This contributed to balance sheet strength with cash and cash equivalents amounting to S$105.4 million.   The Group continued to generate strong positive operating cash flows of S$6.9 million for 1Q2018. This contributed to balance sheet strength with cash and cash equivalents amounting to S$105.4 million.

 Looking ahead, the Group continues to reinvest in technology and new machinery in order to stay ahead of the curve in a dynamic business environment where change is the only constant. To that end, CAPEX rose to S$13.2 million for 1Q2018.


This is supported by the latest opening of the Group’s 20th manufacturing facility located at Penang, Malaysia.

Being strategically located in close proximity to the Group’s customers, capacity would be added progressively to support new contract wins. Over-time, this latest facility is also expected to serve customers in the Group’s other two business segments –Automotive and Healthcare.

In conclusion, Mr Khoo added, “Our order book is stable as existing organic growth initiatives have led to queries from new and existing customers who are confident in our ability to handle challenging projects on a global scale.

 Heading into the remainder of the year, we are vigilant of the headwinds such as foreign exchange volatility and rising labour costs.

 Our focus on boosting the productivity and operational efficiency of our core operations continues to garner momentum. While the business environment and macroeconomic uncertainty present challenges to our operations, we remain confident in the Group’s long-term sustainability and profitability

Quote: Jeremyowtaip

I saw an article written by The Edge Singapore and also went through their 1Q financial results announcement.

From both the article by The Edge Singapore and also from Sunningdale's 1Q results, I noticed three things affecting Sunnningdale's 1Q 18 results y-o-y as compared to 1Q 17.

1. Adverse foreign exchange losses due to weakening of USD versus other currencies such as RMB, RM and SGD affecting both revenue and net profit. I noticed that the amount of forex losses registered can be quite substantial to cause a significant decrease in net profit.

2. Increase in competition and labour cost has caused a decrease in net profit y-o-y. I noticed their administrative expenses has increased y-o-y reflecting this increase in labour cost.

3. Advancing of orders for consumer/IT segment in 1Q17 and comparatively lesser work orders received and completed in 1Q 18. Thus, the revenue for consumer/IT segment has decreased y-o-y and dragged down overall revenue.

However, from their commentary on the outlook for the second half of the year, they are optimistic there will be a ramp up of orders for their newly built Penang manufacturing plant which has started some pilot runs for mass production for consumer/IT segment. Despite this, the company expects their performance for the rest of the year to be affected by volatile forex movements, keen competition and increase in labour cost. The company is still overall optimistic that their business model is resilient and sustainable and should be able to weather this current challenging operating environment.

My take is to continue to monitor their progress for the rest of the year which hopefully as what the management has mentioned, second half of the year should be better. However, if one notice that there are any significant deterioration in it's businesses such as winning even lesser orders going forward from new and existing customers, then one has to investigate whether the company is starting to lose it's competitive edge versus it's competition especially in the consumer/IT segment which is the one which is currently impacted. For now, just monitor their progress going forward.

ParkwayLife Reit

ParkwayLife Reit - It owns the largest portfolio of strategically-located private hospitals in Singapore comprising Mount Elizabeth Hospital, Gleneagles Hospital and Parkway East Hospital. 

In addition, it has 45 assets located in Japan, including one pharmaceutical product distributing and manufacturing facility in Chiba Prefecture as well as 44 high quality nursing home and care facility properties in various prefectures of Japan. 

It also owns strata-titled units/lots at Gleneagles Intan Medical Centre Kuala Lumpur in Malaysia.


Looking through their financial nos from 2013 to 2017, we can notice that its Total Revenue is generally rising at a CAGR of 4.3% from 93693m in 2013 to 109,881m in 2017. This is quite consistently increasing for the past 4 years which is quite encouraging/positive.

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.

Next, we can take a look at the Total Net Income level which has only generated an returns of only 0.81% (CAGR) from 98.279m in 2013 to 101.464m in 2017. The Net Income seems like not growing much. Investor may want to take note of this. 

The DPU has since a marginally increase from 0.107 in 2013 to 0.134 in 2017. An increase of 0.06% CAGR. The average yield for the past 4 years is about 0.122. Giving a yield of 4.38%.
This is generally below the 5to5.5 % yield expectation for investing in Reit counter.

NAV of $1.761, P/B is 1.61 times.

The Gearing % is about 40% which can be roughly calculated base on the Total Liabilites 705,881/ 1771,221 Total Assets . It is still within the guide line being set by MAS.. Generally, we would prefer gearing to be around 30-36%.


Ops cash flows seems quite pretty stable generating a Net cash from Ops is within 76 to 80m.

The current price of $2.78 is trading above it NAV of $1.761 and it is also trading above its fair value of about $2.00( using DDM to work out the fair value ) . I think it is trading at a premium price level and investor may want to take note of this.

Looking through the Historical chart patterns, we can use it as a reference .

Strong support level is around $2.20 level. The next support level would be $1.80.



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

trade/invest base on your own decision. 



 Parkway Life Real Estate Investment Trust (“PLife REIT”) is one of Asia’s largest listed healthcare REITs by asset size. It invests in income-producing real estate and real estate related assets that are used primarily for healthcare and healthcare-related purposes (including but are not limited to, hospitals, healthcare facilities and real estate and/or real estate assets used in connection with healthcare research, education, and the manufacture or storage of drugs, medicine and other healthcare goods and devices). PLife REIT owns a well-diversified portfolio of 50 properties with a total portfolio size of approximately S$1.75 billion as at 31 December 2017.

Venture

Venture - It share price tumble more than 12% from $28.82 to close at $25.29.



This could be due to:

" Shares in the cigarette giant plunged as much as 18 percent after its latest earnings report showed that $4.5 billion spent on four new products are failing to win over new customers. Sales growth of the iQos, a device that heats a tobacco plug without setting it on fire, has been slowing after initial success in Japan.

Philip Morris, which sells Marlboros outside the U.S., reported revenue excluding excise taxes of $6.9 billion, less than the $7.03 billion projected by analysts in a Bloomberg survey. The share decline, to as low as $83.50, was the biggest since the company split from Altria Inc. in 2008. The stock had fallen 4 percent this year through Wednesday’s close of trading. "

quote : https://www.bloomberg.com/news/articles/2018-04-19/philip-morris-sales-disappoint-as-cigarette-demand-slips-further

I think Venture could be one of the contract manufacturer for this iQos product for Philip Morris. I think the declining grow rate for this iQos product may affect their future earnings.

Looking through their financial numbers for the past 5 years, we can notice that the company has been able to consistently growing its Total Revenue from 2,329.551m in 2013 to 4,004.539m in 2017.
This is quite impressive.

Next , we take a look at the Net Income figure which has also been increasing from 131.13m in 2013 to 372.82m in 2017. An increase of almost more than 200%. 

EPS has also been growing at CAGR of 31% from $0.319 in 2013 to $0.943 in 2017. This is growing at a high double digits growth rate which is pretty encouraging.

The Total Assets has also been growing /increasing from 2013 to 2017 as per the table below:

This is a Net Net Position company as can be seen the total current Assets of 2,276.156m is more than sufficient to cover its Total Liabilities of 976.141m. Generally, the company has no problem to service it debts.

Ops cash flow is also very healthy which is clocking at CAGR of 40% as can be seen from the table below, the Ops cash flow in 2013 was 106.5m versus 448.5m in 2017. 

Return of Assets and Return of Equity has also been generally increasing from a low single digit grow to a high single digits grow of 9%. And 7.2% to 18% in 2017..This show that the company is capable of demostrating and enhancing the business value.

I have roughly workout the EPS intrinsic value using CAGR of 31% for past 4 years (2013 to 2017) and a discount factor of 12% ( MOS) , the fair value turns up to be around $24.65 .

Interestingly, i have also tried to workout the Ops cash flow intrinsic value using CAGr of 40% for past 4 years ( 2013-2017) , a discount factor of 12% , the fair value is about $24.00.

Therefore, in my view, the current price of $25.29 is trading at a premium level/ above it fair value.

Also the declining sales for iQos may also affect their rev going forward and it may also impact their fair value.

I think investor has to gauge for themselves whether to lock in profit or exit and wait for further insight for next few quarters results.

Dividend has increased marginally from 50 cents to 60 cents in 2017. Yield is about  2.03%

NAV of $7.08 ,  P/B is 3.38 times.


rolling EPS of 0.994, rolling PE of 24.08 times.

Not a call to buy or sell.

Please do you own due diligence.

Trade/Invest base on your own decision.

quote: Jeremyowtaip,I also dug through some historical financial information on Venture Corp. It gives me the impression that it's operating environment is challenging as revenues, operating profits, net profits have dipped over the past decade but recovered in recent years and especially the most recent FY17, the revenue, operating profit and net profit broke new record high.

The big question is whether going forward, can this global giant leader in the electronics and manufacturing service provider continue to grow and break even more record highs. By the outlook painted by the chairman and CEO in their FY17 annual report, it seems that they are positioning themselves in various areas they serve to foster growth. Their chief financial officer also mentioned in one of the article link below that their clients which are global leaders in electronics and manufacturing industries rely on Venture Corp for their strong R&D capabilities while the clients can focus on what they do best in their own businesses. Thus, the business model of Venture Corp is such that the various clients they serve will be sticky to Venture Corp. However, the chairman and CEO did pointed out that 2018 maybe a volatile year for them.

I am not sure what the chairman and CEO means by year 2018 maybe volatile. We do see a recent news of Philip Morris, one of the many clients which Venture Corp serves which is involved in selling IQOS (I Quit Ordinary Smoking) devices revealed in it's recent earnings call that their sales of IQOS may fall short of their ambitious expectations. According to Venture Corp's FY17 annual report based on the CIMB article link below, only one client accounts for more than 10% of Venture Corp's FY17 revenue of which CIMB thinks it is not Philip Morris. Therefore, this recent negative news will still impact Venture Corp's revenue this year 2018, but it is likely not a significant impact since the potential contribution to Venture Corp's revenue is not more than 10% of it's total revenue.

Venture Corp has strong balance sheet in a net cash position. It has been generating good amount of positive operating cashflows for the past decade. And it's required capital expenditures (capex) every year have been small resulting in high amount of free cashflows generated for the past decade every year. The small amount of capex requirement every year could be so as Venture Corp is more of a service provider for it's clients rather than a manufacturer, therefore it need not expend high capex to purchase a whole lot of plants and equipments.


I also checked up the compounded annual growth rate (CAGR) of it's diluted EPS over the past 5 years since it's profitability has improved over the past 5 years. Venture Corp has grown it's diluted EPS at a CAGR of 20.68% over the past 5 years. Since Venture Corp's latest FY17 performance was an exceptional year and I am not sure whether it can parallel such exceptional performance continually for the next 7 years of a business cycle, I will take a very conservative stance and estimate that it can only grow it's diluted EPS at CAGR of 6% for next 7 years upon it's current record breaking diluted EPS factoring in that the chairman and CEO mentioned before that 2018 is likely a volatile year for them. Therefore assuming this CAGR of 6% for it's diluted EPS going forward, using my method of estimation, I work out the fair share price of Venture Corp to be around $26.65. Based on one of the article link below by CIMB Research, their target price for Venture Corp is $30.81.

Venture Corp last closed at $25.29. Thus, I believe we are about there in terms of a fair share price for it. If an investor is worried whether the share price still has room for falling, then my suggestion is to wait for further price weakness to get it even cheaper or wait for the price to stabilise before buying. The cheaper one gets it below the estimated fair share price, the larger margin of safety one will receive to cushion the impact from Philip Morris affecting Venture Corp. Any further selling of the shares based on what I can see could be an over-exaggerated reaction to the impact from Philip Morris on Venture Corp's performance this year.

Venture Corporation Limited, together with its subsidiaries, provides technology services, products, and solutions in the Asia Pacific. The company operates through Electronics Services Provider, Retail Store Solutions and Industrial, and Components Technology segments. It offers manufacturing, product design and development, engineering, and supply-chain management services to the electronics industry. The company also designs, manufactures, assembles, distributes, and trades in electronic, mechanical, and computer related products and peripherals; manufactures and sells terminal units; develops and markets color imaging products for label printing; designs, integrates, and trades in electronic security systems; and develops and supports information systems. In addition, it engages in the provision of manufacture, design, engineering, customization, and logistics and repair services; manufacture, design, fabrication, stamping and injection, metal punching, and spraying of industrial metal parts, tools, and dies; and design, customization, and marketing of tool-making and precision engineering solutions. Further, the company manufactures plastic injection molds and moldings with secondary processes and subassembly; and provides manufacturing services to electronics equipment manufacturers, as well as offers management services. Additionally, it imports and exports electronic parts, components, equipment, devices, and instruments. Venture Corporation Limited was founded in 1984 and is headquartered in Singapore.

Bank counter

DBS , UOB & OCBC bank counters are having similar chart patterns did you happen to notice that ?

It could well be a push & dump tactics being planned / played out by Big Buyer(BB). So , it is better to be careful not too chase blindly without having a proper plan in place .

Do exercise your own due diligence.

The series of Gap Up is a warning sign and may not likely sustain.

Bank counter may suffer greater fall when market goes into Bear mode or major correction.

Especially with Dow and S&P closing softer/lower last night , we may see some selling effect today .

Not a call to buy or sell.
Trade/invest base on your own decision.

US Stocks close lower as Apple falls, rates rise

• Shares of Apple fell 2.8 percent, while Nvidia, Micron and Advanced Micro Devices all declined at least 2.4 percent following a warning from Taiwan Semiconductor Manufacturing.
• Wall Street also watched out forrising interest rates, as the 10-year Treasury note yield broke above 2.9 percent.

Dow Jones industrial averageclosed 83.18 points lower at 24,664.86, with Apple among the worst-performing stocks in the index. The S&P 500 declined 0.6 percent to 2,693.13 with technology and consumer staples falling 1.1 percent and 3.1 percent, respectively. The Nasdaq composite dropped 0.8 percent to 7,238.06.(cnbc.com)

20 April 2018 :

Dow Jones industrial average fell 201.95 points, or 0.8 percent, to 24,462.94 as Apple dropped 4.1 percent. The Nasdaq compositedeclined 1.3 percent to close at 7,146.13.

The S&P 500 pulled back 0.8 percent to 2,670.14, with tech sliding 1.5 percent. The index also broke below its 50-day moving average, a key technical indicator.

DBS - DBS is a leading financial services group in Asia, with over 280 branches across 18 markets. Our aim is to become “The Asian Bank of Choice for the new Asia”. We are an Asia-centric commercial bank focused on harnessing the region’s long-term potential as the centre of economic gravity shifts eastwards to Asia. To differentiate ourselves, we have developed a unique brand of banking, Banking the Asian Way. We seek to provide a kind of banking that's joyful and trustworthy as we help to transform this region that we live in.

We are distinct from local lenders or global players. As an Asian specialist, we have the reach and sophistication to outcompete local lenders, and deep Asian insights that distinguish us from global competitors.

We seek to intermediate trade and investment flows between Asia’s three key axes of growth – Greater China, South Asia, and Southeast Asia – as well as participate in Asia’s growing affluence. Our key franchises are in Singapore, Hong Kong, China, Taiwan, India and Indonesia.

In Singapore, our home market, we are a universal bank serving all customer segments, including the mass market through the DBS and POSB “People’s Bank” franchise. In other markets, we focus on three lines of business :

• Corporate/Investment banking
  (covering large corporations and institutional investors)
• SME banking
• Wealth management

We see an opportunity to leverage digital technology as a means to reach customers across Asia.

China Sunsine

China Sunsine - It has managed to stage a nice reversal after being sold down as reflected on the chart .

Seems likelike BULL is in control as The price is trading abive its 20 day MA & 50 day MA.

Looks Bullish! It may likely move up to retest $1.49. Breaking out of $1.49/$1.50 with ease + high volume that may likely propel to trend higher to $1.55 then $1.60 and above.

Rolling EPS of 0.116. Rolling PE of 11 times. NAV of 0.668.

Not a call to buy or sell. pls do you own due diligence.

China Sunsine Chemical Holdings Ltd., an investment holding company, engages in the manufacture and sale of rubber chemical products in the People's Republic of China, rest of Asia, the United States, Europe, and internationally. The company offers rubber accelerators, anti-oxidant agents, vulcanizing agents, anti-scorching agents, and insoluble sulphur used for the production of tires and other rubber related products, such as shoes, belts, and hoses. It is also involved in the production and supply of heating power, including preparation and implementation of the project; and hotel and restaurant business. The company offers its products under the Sunsine brand name. It primarily serves the tire companies. The company was incorporated in 2006 and is based in Singapore. China Sunsine Chemical Holdings Ltd. is a subsidiary of Success More Group Limited.


 First, we look at the compounded annual growth rate (CAGR) in revenues for China Sunshine for the past 5 years from 2013 to 2017.

  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.

 Total revenue has been increasing in double digits growth of almost 50%(CAGR) which is superb. The total revenue has grown from $353M to $562m.

 Next, we are looking at the Net Income which is growing at a multiple of almost 4 times which is $16M from 2013 to a whopping $70.1m for 2017.



Now , we are going to take a look at the Normalized diluted EPS - Normalized Net Income divided by the diluted weighted average share outstanding. It is growing at a CAGR % of 40% which is amazing from 3.3 cents from 2013 to 12.8 cents from 2017.

Next on to their efficiency. China Sunsine'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 Metricsand they have maintained well at current levels of ROA (above 25%) and ROE (above 22%). 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. China Sunsine justdemonstrated 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.

Now on to their liquidity. We see that China Sunsine just got much better at their cash conversion cycle. Now on to their liquidity. We see that China Sunsines just got much better at their cash conversion cycle. The number of days in their cash conversion cycle has decreased significantly over the past 5 year meaning that it takes them much lesser time in number of days to convert cash on hand into even more cash through their operations.he number of days in their cash conversion cycle has decreased significantly over the past 5 year meaning that it takes them much lesser time in number of days to convert cash on hand into even more cash through their operations.
It is taking lesser nos of days to collect the cash from 121 days to 101 days.

We now look at how their balance sheet has changed over time.. I will tabulate the comparison of some important metrics between close to 5 years ago (2013) versus latest financial report (2017).


Current ratio = 1.67 (2013) vs 3.69 (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 = 1.30 (2013) vs 3.14(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.

Net Profit Margin = 4.53 (2013) vs 12.46 (2017)

EBITDA Margin = 11.61 ( 2013 vs 21.14 (2017)


I also noticed that they are now a net net company with their current assets more than their total liabilities. 
Total Current Assets - $292.607m vs Total Current Liability of $79.139m.

The Operation cashflow has a great improvement from $27.59m to $79.37m.

Net Change in Cash inflow from $7.11m to $45.56m

I have roughly workout the intrinsic fair value for EPS for past 4 years (2013 - 2017) with CAGR of 40% and discount factor of 25% to come up with a value of $2.51.
I would further factor in a further discount of 20% i.e.$2.51 X 0.8 = $2.00.

The current price of $1.46 may present a further upwards potential of 37% to reach $2.00.

If using the Cash flow to work out the intrinsic value for past 4 years with CAGR of 50% and a discount factor of 25% we may roughly drive the fair value of $1.828.
Let say we factor in another 15% discount which is $1.828 x 0.85 that would give us a estimated fair value of $1.56.

The potential to rise from current price of $1.46 to $1.56 is another 10 cents..

Dyodd

Sunningdale Tech

Sunningdale Tech - From TA point if view, it is heading into bearish mode and oversold territories.

Immediate support is at $1.73/$1.69.

I am getting excited and see some opportunity is surfacing.

Not a call to buy or sell.

Please do your own due diligence.

I have looked through Sunningdale Tech and here are my thoughts on this tech company.

Sunningdale Tech is a leading Asian tooling, plastic injection moulding and precision assembly company. They are currently operating in four main business segments namely automotive, consumer/IT/environment, healthcare and tooling/mould fabrication. They currently have 19 manufacturing facilities spread across 9 countries and as their chairman mentioned, they continue to receive queries from both new and existing customers who recognise their ability to undertake projects on a global scale. So far so good, the background business profile seems to suggest they are a global player in their field.

The chairman in the FY16 annual report did raised a few challenges their businesses constantly face such as foreign exchange movements, rising labour cost, pricing pressure from customers, rising input costs, and structural reforms in China (which affects their China based businesses).

With these backdrop, let us look into their business performance so far over the past decade. First, we look into how their revenues have grown over the past decade. Revenues have grown by a compounded annual growth rate (CAGR) of 6.52% over past decade.

Next, their operating profit has grown by a CAGR of 9.2% over the past decade.

Next, their profit attributable to shareholders has grown by a CAGR of 9.98% over the past decade.

Next, their diluted earnings per share (EPS) has grown by an impressive CAGR of 25.9% over the past decade.

This is a low profit margin company. Let's look at how the profit margins have changed a decade ago compared to now.

Operating profit margin = 4.6% (2007) vs 5.9% (2017)
Profit attributable to shareholders margin = 3.1% (2007) vs 4.3% (2017)

The various profit margins have improved over the past decade though they are generally still at low single digits. The operating profit, profit attributable to shareholders and diluted EPS have all grown faster than revenues. It seems that Sunningdale Tech have managed to keep the various operating expenses well controlled to achieve better operating efficiency. Indeed, the % of operating expenses (excluding finance cost) over revenues have decreased from 12.4% to 9.6% over the past decade. In 2017, operating expenses (excluding finance cost) only made up 9.6% of their revenue. They have been definitely doing well to reduce operating expenses while improving profit margins amidst a challenging business environment they operate in with pricing pressure from customers and rising input cost and labour cost over the past decade.

Now let's look some of the various metrics from their balance sheet and see how have they changed over the past decade.

Current ratio = 1.21 (2007) vs 1.74 (2017)
Quick ratio = 0.39 (2007) vs 0.39 (2017)
Debt to equity ratio = 0.29 (2007) vs 0.28 (2017)
Shareholder equity CAGR = 1.12%

This was a net net company (current assets > total liabilities) a decade ago and a decade later, it still maintains it's net net company status. The company has maintained similar leverage level taken a decade ago and now. It's balance sheet is strong as it has maintained it's net net status over the past decade. However, Sunningdale Tech did not grow it's shareholder equity at high CAGR thus not making their shareholders wealthier at a fast rate.

The returns on assets, returns on equity and returns on invested capital a decade ago were at low single digits of 2.36%, 3.75% and 3.62% respectively. However, the various returns have improved over the past decade and now returns on assets, returns on equity and returns on invested capital stand at 6.98%, 13.28% and 10.75% respectively. Clearly, the management has become more efficient over the past decade in producing better returns. The question now is can the management continue to improve their various returns any further or are these the best they can achieve? This is because the various returns though have improved over the past decade, have also remained stagnant around current levels for the past 3 years.

Next, we look at how their cashflows have grown. Operating cashflows have not grown much at all and remained at about similar levels now as compared to a decade ago. Free cashflows have decreased in their reported FY17 financial results as compared to a decade ago. I noticed the trend of their operating cashflows and free cashflows over the past decade can be quite volatile with some years having more operating cashflows and free cashflows while other years having lesser. Nevertheless, their free cashflows are still able to meet their dividends paid. One may need to watch their future cashflows carefully to make sure their cashflows can continue to grow even while over any single year, it may show volatile swings. If future cashflows do not grow anymore and even show a decreasing trend, then it could be a potential red flag to watch out for.

Nevertheless, Sunningdale Tech has strong balance sheet. But, we will also like to see that it can continue to receive increasing operating and free cashflows from it's businesses as it continues it's growth. Or else, the current assets carried on their balance sheet though looking impressive giving them a net net status and especially made up of a good amount of trade and other receivables, may start to make one worry whether there are any difficulties with collecting cash from these receivables.

Overall, I find Sunningdale Tech still an alright investment for consideration. But based on some of the above potential weak spots such as the weakness of it's cashflows being raised and operating in a constantly challenging environment, I will put it as an alright but not fantastic investment idea.

Valuation wise, if we assume the diluted EPS will continue to grow at a historical CAGR of 25.9% for next 7 years, the fair share price is $9.84. Wait a minute! This is insane! Sunningdale Tech is only trading at $2 now. At $2 now, the market is according a forward CAGR of 1.9% for the diluted EPS of Sunningdale Tech. Either the market is very intelligent or very stupid from what I can see. Perhaps from certain potential weak spots in the businesses such as the volatile cashflows and challenging operating environment as mentioned earlier, the market is discounting Sunningdale Tech.

I also noticed that the diluted EPS of Sunningdale was also volatile as well over the past decade with some years swinging into losses. The significant growth in the diluted EPS came in only from 2015 to 2017. Previous years had much lower diluted EPS registered. Thus, I think it is better to watch out whether Sunningdale Tech can continue to register stable growth in it's diluted EPS. As such, I think I will perhaps follow the market's assumption that Sunningdale Tech will grow it's diluted EPS at CAGR of 1.9% as a conservative measure and see the current traded price of $2 as my final conclusion of it's fair share price. Any upside will have to depend on how Sunningdale Tech can stably grow it's diluted EPS and cashflows over the next 7 years.

Thus, a fair share price of $2 is not too low an estimate (factoring in a margin of safety for the investor) in order to give the company time in future to see whether they can stabilise their growth going forward in these two areas of their diluted EPS and cashflows, minimising their volatilities, and even avoid any potential losses. If they can do that, their share price will certainly have much room to run higher.

NAV of $1.935 ,Rolling EPS is 16.6 cents, PE of 12 times. Dividend of 7.5 cents, Yield is 3.73%

Price/NAV 1.03 times.