StarHill Global Reit

3rd quarter result is out . DPU is down 7.6% as compare to last year . DPU of 1.09 cents is lowered than 1.18 cents.

HIGHLIGHTS
• Completion of asset redevelopment works at Lot 10 and tenant renovations at China Property

• Handover of Plaza Arcade unit to anchor tenant UNIQLO

SINGAPORE, 26 April 2018 – YTL Starhill Global REIT Management Limited, the manager of SGREIT, is pleased to announce the results for the three months ended 31 March 2018 (3Q FY17/18).

 Revenue for SGREIT group in 3Q FY17/18 was S$51.7 million, a decrease of 3.0% over the previous corresponding period of three months ended 31 March 2017 (3Q FY16/17).

Net Property Income (NPI) was S$40.3 million, a decrease of 2.3% over 3Q FY16/17. The decrease in gross revenue was mainly due to weaker contributions from the office portfolio, disruption of income from asset redevelopment works at Plaza Arcade in Perth and lower revenue at Myer Centre Adelaide.

The decrease in NPI for SGREIT group was largely in line with the lower revenue, partially offset by lower expenses mainly for the China Property. In Perth, Plaza Arcade’s anchor tenant UNIQLO has commenced renovation works, with targeted completion in 2H 2018.

The external works to create a new entry point to Lot 10 in Kuala Lumpur has been completed, providing improved accessibility to the mall from the new MRT station exit on the ground floor.

Renovations by tenant Markor International Home Furnishings Co. Ltd. at the China Property have also been completed and the tenant has officiated its opening in March 2018. Income to be distributed to Unitholders for 3Q FY17/18 decreased by 7.6% over the previous corresponding period to S$23.8 million, mainly due to lower NPI and higher withholding taxes.

Distribution Per Unit (DPU) for 3Q FY17/18 was 1.09 cents, representing an annualised distribution yield of 6.05%1. Unitholders can expect to receive their 3Q FY17/18 DPU on 30 May 2018. Book closure date is on 7 May 2018 at 5.00 pm

Review of portfolio performance 

SGREIT’s Singapore portfolio, comprising interests in Wisma Atria and Ngee Ann City on Orchard Road, contributed 62.6% of total revenue, or S$32.4 million in 3Q FY17/18. NPI for 3Q FY17/18 decreased by 2.9% y-o-y to S$25.7 million, mainly due to lower occupancies in Singapore offices and weaker contributions from Wisma Atria Property (Retail). The Singapore office portfolio revenue and NPI declined 10.4% and 12.4% y-o-y respectively in 3Q FY17/18. However, committed office occupancies rose to 90.7% as at 31 March 2018 from 89.4% as at 31 December 2017 and 83.5% as at 30 September 2017.

Singapore retail portfolio continued to sustain high occupancy of 99.1% as at 31 March 2018. Ngee Ann City Property (Retail) maintained full occupancy while Wisma Atria Property (Retail) maintained high committed occupancy of 97.2%. Ngee Ann City Retail revenue and NPI were largely stable on the back of the Toshin master lease.

SGREIT’s Australia portfolio, comprising Myer Centre Adelaide in Adelaide, South Australia, the David Jones Building and adjoining Plaza Arcade in Perth, Western Australia, contributed 21.3% of total revenue, or S$11.0 million in 3Q FY17/18. SGREIT has long-term leases with Myer Pty Ltd and David Jones Limited, contributing approximately 6.9% and 4.7% of its portfolio gross rents respectively as at 31 March 2018. NPI for 3Q FY17/18 was S$6.8 million, 13.8% lower than in 3Q FY16/17 mainly due to Plaza Arcade’s redevelopment works, lower revenue at Myer Centre Adelaide largely due to office vacancies and allowance for rent rebates, as well as the depreciation of the Australian dollar against the Singapore dollar. The redevelopment at Plaza Arcade includes a new façade and the addition of approximately 8,000 square feet or 33% more retail space on the upper floor to cater to anchor tenant UNIQLO. The premise has been handed over to the tenant, who has commenced renovation works with expected completion targeted in 2H 2018. With the completion of the asset redevelopment, Plaza Arcade’s revenue contribution is expected to improve.

SGREIT’s Malaysia portfolio, comprising Starhill Gallery and interest in Lot 10 along Bukit Bintang in Kuala Lumpur, contributed 13.8% of total revenue, or S$7.1 million in 3Q FY17/18. NPI for 3Q FY17/18 was S$6.9 million, 6.3% higher than the previous corresponding period mainly due to the appreciation of the Malaysian ringgit against the Singapore dollar. Lot 10 has completed its internal rejuvenation works and the external works to create a new entrance from the new MRT station exit has also been completed, improving the accessibility of the mall for shoppers and commuters.

The balance of SGREIT’s portfolio, which comprises a property in Chengdu, China and three properties located in central Tokyo, Japan, contributed 2.3% of total revenue, or S$1.2 million in 3Q FY17/18. NPI for 3Q FY17/18 was S$0.9 million, up 144.1% over 3Q FY16/17, mainly due to lower expenses for the China Property, following the conversion of the departmental store model to a single tenancy model. The renovation works by the tenant has been completed and the tenant has officiated its opening in March 2018.

9th Month DPU of  3.46 cent is slightly lowered than 3.74 cent last year.

I think with the Singapore occupancy rate staying at 99.1% looks healthy.
Australia Plaza Arcade’s revenue contribution is expected to improve.
I think 4th Qtr DPU may slightly increase.

Hopefully , Whole year DPU may likely maintain around 4.92 cetns same as last year.
Yield is about 6.8% base on share price of 72 cents.

These are my findings for Starhill Global REIT. Starhill Global REIT as they described themselves on their website is a REIT which currently has a portfolio of 11 properties used primarily for retail and office uses. Their flagship properties are Wisma Atria and Ngee Ann City located in Orchard Road of Singapore. They have grown in their portfolio from their two flagship properties to now total of 11 properties located across KL Malaysia, Chengdu China, Tokyo Japan, Perth and also Adelaide Australia. Thus, they are now diversified into different geographical regions.

For this sharing, I will do a comparison of Starhill Global REIT versus CapitaMall Trust, a very familiar Singapore large retail REIT which is also the first listed REIT in Singapore. Since Starhill Global REIT derives majority of their revenue from retail tenants and less so from office tenants, it is still a reasonable comparison against CapitaMall Trust. I will compare their compounded annual growth rates (CAGRs) in three different important metrics over the past 11 years since 2006 to 2017. These three important metrics are net property income, distributable income and value of investment properties. The exact period of comparison may differ slightly due to different reporting timings of their full year results. Nevertheless, it is still kept to not more than half a year difference in both their period of comparison.

First, we look at the net property income growth. For CapitaMall Trust, it's net property income has grown at a CAGR of 7.42% over the past 11 years from 2006 to 2017. For Starhill Global, it's net property income has grown at a CAGR of 9.2% over a similar period.

Next, we look at the distributable income growth. For CapitaMall Trust, it's distributable income has grown at a CAGR of 8.02% over the past 11 years. For Starhill Global, it's distributable income has grown at a CAGR of 7.2% over a similar period.

We look now to the value of investment properties growth. For CapitaMall Trust, it's value of investment properties has grown at a CAGR of 6.1% over the past 11 years. For Starhill Global, it's value of investment properties has grown at a CAGR of 7.29% over a similar period.

Just to have some perspective on the size of these two retail REITs currently. The value of investment properties held by CapitalMall Trust as of Dec 17 is around $8.77 billion while the value of investment properties held by Starhill Global REIT is around $3.15 billion. We can see that the latter is less than half the size of the former in terms of the value investment properties held in it's portfolio. Thus, we are comparing a much bigger retail REIT player CapitaMall Trust which is focused on a Singapore retail mall market to a smaller global retail REIT player Starhill Global which is diversified across retail mall markets in different geographical regions.

In terms of net property income growth, Starhill Global has delivered close to 2% higher CAGR than CapitaMall Trust over the past 11 years which is significant. In terms of distributable income growth, Starhill Global loses marginally in less than 1% point to CapitaMall Trust in the CAGR of distributable income. Perhaps CapitaMall Trust is slightly more efficient in growing and managing it's cash available for the purpose of distributions despite producing a slightly lower growth in it's profitability as a retail landlord as compared to Starhill Global.

If we look at the growth in value of investment properties, Starhill Global REIT has been growing at a higher compounded annual rate at about 1% higher than CapitaMall Trust. This is not surprising due to the former which is a smaller retail player as compared to the latter with room to grow faster. The larger the investment property asset size a REIT owns, the slower growth it will likely experience as it needs to look to acquire more properties and also properties of larger value quantum as it grows larger in order to match it's previous growth rates. Also, the value of investment properties may fluctuate at times and properties in different geographical regions may be subjected to different valuations depending on the property market conditions affecting property valuations in the different regions and subsequently the growth in value of investment properties. A possible question to ask here is how do the valuations and the growth in valuations of retail mall properties in Singapore compare against that in KL Malaysia, Chengdu China, Tokyo Japan and the two places of Australia that Starhill Global REIT has properties in? Is a diversified strategy in this sense better than a Singapore focused strategy?

Other metrics of comparison such as overall occupancy rate and gearing are about similar for both retail REITs at more than 90% and about 30 plus % respectively. Thus on an overall basis, Starhill Global REIT a geographically diversified retail REIT player compares favourably to CapitaMall Trust a large established retail REIT based in Singapore.

Starhill Global REIT is currently trading at $0.72 and has a $0.91 NAV per unit and a distribution yield of about 5.99%. CapitaMall Trust is currently trading at $1.98 and has NAV per unit of $1.92 and distribution yield of about 5.64%. It seems that Starhill Global REIT is currently trading at a cheaper valuation versus CapitaMall Trust even though both are comparable in terms of their growth performance on net property income, distributable income and value of investment properties over the past 11 years.

Hi Sporeshare, I attached below a link to the Straits Times article which summarises what are the current developments in Starhill Global REIT which caused their overall drop in gross revenue, net property income and DPU for most recent performance.

The reasons given were due to:
1. the effects of straight-line rental adjustments.
2. higher withholding taxes for Malaysia and Australia properties.
3. weaker contributions from offices.
4. disruption of income from ongoing asset redevelopment works at Plaza Arcade in Perth.
5. lower revenue at Myer Centre Adelaide Australia.

The CEO of Starhill Global REIT commented that their Singapore retail portfolio has remained stable while new take-ups for office space were encouraging.

Also, the asset redevelopment works on Plaza Arcade and Lot 10 will likely be completed this first quarter meaning for the rest of this year, these two properties can start to contribute to revenue and net property income etc. again.

The chairman of Starhill Global REIT also made similar comment that earlier initiatives to rejuvenate the portfolio has been timely and the REIT will be in a good position to ride any retail sector upturn.

If we look at the reasons given for the recent few quarters weaker results and the replies by the CEO and Chairman, we should ask a question. Do these guys know what they are doing and are what the various actions they are carrying out currently for this REIT and unitholders make sense to grow the distributions for the long term?

As far as I can observe, some factors were not within their control to be fair to the management. Things like straight line rental adjustments and higher withholding taxes on Malaysia and Australia properties. This maybe one of the thing to look out for when investing in overseas properties. If Singapore has a comparatively lower tax on retail properties, then perhaps a Singapore focused retail property portfolio maybe better. But then again, there maybe certain tailwinds found in overseas retail mall markets which may not be present in Singapore especially if the growth element in retail mall market in our saturated tiny red dot is going to be limited going forward.

The CEO commented recent new office take ups were encouraging. Also, both CEO and Chairman thinks that sacrificing a few quarters of lower net property income and DPU to redevelop their Australian assets at this timely moment will ensure the assets there can capture the ride in retail sector upturn. Thus, I think it is only fair to give the REIT another few more quarters to see whether there is any improvement in their metrics such as gross revenue, net property income, distributable income and DPU. This will tell us whether what the management is doing currently really is of good foresight in terms of future benefits for the unitholders. Next few quarters, there are no more excuses such as asset redevelopment works affecting their performance. Let's see whether their performance picks up from here going forward in order to make a fair opinion on them. As of now, the various reasons given are reasonable in my opinion to explain why their various metrics are performing weaker.

Straits Times article Business section: Starhill Global Reit's DPU down in Q2 

http://www.straitstimes.com/business/starhill-global-reits-dpu-down-in-q2

Sembcorp Marine

Sembcorp Marine:

Key highlights: For the three months to March 31, 2018  Revenue of $1.18 billion. 
Net profit of totalled $5.3 million. 

EPS of 0.25 cents .
A drop if 86% as compared to last year EPS of 1.77 cents ( once-off gain ) .

NAV of 1.157
PE of 220 times (0.25 x 4).

Price seems very high at $2.23 per share.

I think It has overrun ahead of it's fundamental.

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

Secured $476 million in new contracts in 1Q 2018. Singapore, April 25, 2018: Sembcorp Marine posted Group revenue of $1.18 billion for the three months to March 31, 2018. This compares with $746 million in revenue generated in 1Q 2017 (restated for accounting changes on adoption of SFRS (I)). The higher revenue in 1Q 2018 was largely due to higher recognition on delivery of 2 jackup rigs to Borr Drilling and 1 jack-up rig to BOTL during the quarter. Excluding the effects on the adoption of SFRS(I) 15, revenue would have been $858 million, an increase of 15% compared with 1Q 2017.

Turnover for Rigs & Floaters was $1.02 billion in 1Q 2018, compared with $327 million in 1Q 2017 (restated for accounting changes on adoption of SFRS (I)). The higher revenue was related to recognition of the Borr Drilling and BOTL jack-up deliveries as well as higher floaters revenue on recognition of the Johan Castberg project. Offshore Platforms revenue was $62 million in 1Q 2018 compared with $302 million in 1Q 2017 due to completion of existing projects. During the quarter, revenue from the remaining work for the three topside modules for the Culzean platform topsides continued to be booked progressively. Delivery of the topside modules is scheduled for June 2018. Revenue from Repairs & Upgrades totalled $79 million for 1Q 2018 compared with $95 million in 1Q 2017 on fewer ships repaired. A total of 80 ships and other vessels were repaired or upgraded in the first quarter of this year compared with previously.

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Venture

Venture - from TA point of view, it is rather bearish! The current price of $21.80 has broken down the 20 days , 50 Days and 100 days Moving Average.

It is now going down to test it's 200 days Moving Average at around $20.76.

 If it is not able to hold at this support level then it may slide further down towards $20 then 19.67 level.

Thee selling down I think has been more or less due to not so rosy sales report for IQOS product.. I think is good time stay sideline and wait for it to be stabilised before taking and action.

 Result fir 1st quarter will be out this evening. All eyes are waiting for further insights/guidance.

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

Rolling EPS of 0.994
Rolling PE of 22 times
NAV of $7.08

Dividend of 60 cents.

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.

ThaiBev

ThaiBev - Today it has a Beautiful white soldier with wide thrust bar appear on the chart, this is rather bullish!

Looks like it had hit the bottom after touching 78 cents and hovering near 79-80 cents before fund coming in with Full force and ramp up the share price Up 7.5 cents to 87.5 cents. Seems like the worst is over and we may likely see this bullishness continue to be played out in next few days.

This sudden upsurges of the price with super high volume could be expecting a better set of financial result .

I think it might be good to wait for the cincom result before taking further action.

Not a call to buy or sell.

Trade/invest base on your own decision.

ThaiBev - here goes my thoughts on Thai Beverage.

Thai Beverage has grown tremendously over the years from making many acquisitions to now being the largest beverage group in Thailand and also the leading beverage group in Southeast Asia.

 Thai Beverage is a company operating in four different segments, namely, Spirits, Beer, Food, and Non-Alcoholic Beverages. One of their iconic acquisitions in recent years was the acquisition of Frasers and Neave, a large beverage group in Singapore. With this acquisition, Thai Beverage has cemented it's position as a leading beverage group in Southeast Asia.quote:Jeremyowtaip

Also, Thai Beverage not only expanded in size of operations through many acquisitions made, it has also diversified it's businesses to now owning four business segments namely spirits, beers, non-alcoholic beverages and food & restaurants. Another iconic acquisition made by them recently was the acquisition of all KFC franchisees in Thailand from Yum Brand to own a substantial stake in the food and restaurant business in Thailand.

I looked at their past decade trend in financials and my first impression even before I zoomed in on the specifics of each important metric is that I am 'wowed' by their trend in financials. Let us dissect this acquisition beast which have grown tremendously over the years to look at their interesting growth in the various metrics.

I will present their compounded annual growth rates (CAGRs) of the various important metrics below for the past decade from 2007 to 2017:
Total revenues CAGR = 7.26%
Gross profits CAGR = 6.95%
Operating profits CAGR = 5.6%
Net profits (adjusted for one-off items) CAGR = 9.7%
Total assets CAGR = 9.34%
Shareholders' equity CAGR = 9.21%
Operating cash flows CAGR = 6.05%
Free cash flows CAGR = 4.48%

Next, I will present a snap shot of some more metrics a decade ago in 2007 and recent in 2017:
Cash conversion cycle (days) = 138.57 (2007) vs 97.13 (2017)
Gross profit margin = 29.51% (2007) vs 30.58% (2017)
Net profit margin (adjusted for one-off items) = 10.33% (2007) vs 12.8% (2017)

Return on assets = 12.58% (2007) vs 13.4% (2017)
Return on equity = 19.32% (2007) vs 19.6% (2017)
Debt to equity ratio = 0.45 (2007) vs 0.47 (2017)

I will now discuss Thai Beverage's trend of financials over the past decade in the few important aspects of profitability, efficiency, liquidity and leverage to see how they have performed.

First on to their profitability. We see that the total revenues, gross profits, operating profits and net profits have all grown at mostly high single digits compounded growth rates over the past decade. Thai Beverage may not be a fast grower commanding strong double digits compounded growth rates, but it has grown at a respectable high single digits compounded growth rates in these metrics. If we look at the gross profit margins and net profit margins a decade ago and now, the margins are maintained and in fact net profit margin has become better. I took a deeper look at the trend for these two profit margins and indeed the margins have maintained well over the past decade with no sudden drops in between. This shows us that Thai Beverage does boasts of a stable and resilient profitability in it's overall businesses over time.

Next on to their efficiency. Thai Beverage's return on assets (ROA) and return on equity (ROE) have maintained well one decade ago and in recent 2017. In fact, I looked at their one decade trend in these two returns metrics and they have maintained well at current levels of ROA (above 10%) and ROE (above 15%). 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. Thai Beverage 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.

Now on to their liquidity. We see that Thai Beverage just got much better at their cash conversion cycle. The number of days in their cash conversion cycle has decreased significantly over the past decade meaning that it takes them much lesser time in number of days to convert cash on hand into even more cash through their operations. Also, their operating cash flows and free cash flows have grown over the past decade generating more cash flows albeit their free cash flows have grown at a lower compounded growth rate. Their free cash flows over the past decade have been on average about four times their capital expenditures in any single year. They are definitely generating hell lots of free cash flows from their businesses with such relatively low capital expenditures requirement. It is no wonder with their strong liquidity and cash flows that they have the means to maintain a high dividend payout ratio of at least 50% of their net profits..

Next on to their financial leverage. Thai Beverage's debt to equity ratio has maintained at 0.45 to 0.47 level over one decade period. However, lately, there were concerns of chalking up too much debts to make four recent acquisitions (see link below). The debt to equity ratio of Thai Beverage from their most recent 1Q results ended 31 Dec is now around 1.76. Good gracious! They have just leveraged themselves higher at slightly more than 3 times their historical average leverage level. The big question now on every shareholder's mind should be whether they have just chewed more than they can swallow? Will they choke on so high a leverage or are we simply getting too overly worried?

I did an estimation of how long their free cash flows at current level (assuming their free cash flows do not increase anymore) will pay back all their debts. It will take them approximately 9.6 years to pay back all their existing debts (both short term and long term debts) by their existing free cash flows. I think Thai Beverage will likely roll over some of the debts by refinancing while repaying some debts along the way to reduce their current high leverage. If we examine their current assets versus current liabilities, current assets stand at about 79 billion Baht while current liabilities stand at about 90 billion Baht. Thus, with another 24 billion Baht from their existing free cash flows, immediate working capital needs should be adequate for them. We must not forget also that the new acquisitions will also contribute to their cash flows and create another additional buffer for their liquidity needs.

All in, I think we should not fret out on their high leverage at the moment but continue to monitor their progress at this stage of their expansion to give them time to work things out to reduce their leverage gradually which they have the strong cash flows generation and enough resources to manage this high leverage.

Valuation wise is tricky at the moment with these new acquisitions and high leverage now taken to work out how the future growth in EPS will be like. Perhaps a few more quarters will paint a better picture on how the new acquisitions will impact their earnings and cash flows for working out any fair valuation for them. At the moment, I will just observe this beverage giant going forward for new developments on their earnings and cash flows.

Article from Bangkok Post: ThaiBev riding Asean acquisition wave 

As per mentioned in my comment, I have no fair value for Thai Bev until I can see how their earnings and cash flows for next few quarters change after these recent acquisitions.

However, just for interest sake, I did an estimation of their enterprise value per share using figures from SGX Stock Facts (assuming the figures presented there are accurate). It works out to be $1.79 per share. Enterprise value (EV) is often thought of as a more robust measurement than market capitalisation of the true value of a company in the event of a take over of the company.

Thus, if we look at the current share price, it is definitely trading below the EV per share. As I have mentioned, EV though being a more robust measurement of the true value of an enterprise will only be potentially realised upon a take over of the enterprise. I will thus refrain from commenting whether the share price is really cheap now based on an ongoing business basis and not being viewed as a near term potential take over target. I will wait a while more to see how things work out for them (in view of recent changes to their leverage and substantial acquisitions made) based on this full year's results before being able to work out a fair value per share on an ongoing business growth in earnings basis.

Jeep wise, maybe not so soon for me until I can work out a fair value for them. But, I have a hunch with the current drop in their share price, it does present a very tempting bargain proposition for many investors.

Yup TII, I think they must already know how much leverage they could have managed on their risk scenario and ROI analysis for them to be so confident to take on these 4 acquisitions within a short time. Afterall, they have been on a track record of many acquisitions done before and never had liquidity issues before. But having said that, history may not be 100% a guarantee of future. I think it is better to observe their performance for a while going forward how they manage their current leverage and how the acquisitions contribute to their overall profitability, cash flows and ROI before commenting on whether they might have chewed off too much than they can swallow. As of now, I am cautiously positive based on their existing profitability, cash flows and cash level that they might not have reached a stress breaking point yet with these acquisitions. We shall see going forward.

Yup! The lower price to jeep, the better! No hurry yet until things pan out clearer for them. If already vested, no worry too as I think they are strong enough to manage this current leverage .

Cash flows are key going forward for Thai Bev. I think the huge amount of goodwill and the interest payment for the loans may drag down the reported earnings. How much will depend on how strong are the cash flows from the new and existing businesses.

Being such a large corporation, their finance team must have run through extensively on the risk scenario and ROI analysis, for them to be so confidence to buy these 4 acquisitions within a short time span. All The Best!

dyodd.

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.