ThaiBev update

THaiBev - this is the sharing gather from our IN FA expert comments after THaiBev released it's 1Q 2018 result : Quote : Jeremyowtaip

here it goes my thoughts on their latest results.

I can sense that their 2Q18 results is getting slightly better than 1Q18 results.

However, they are still running in the cost of acquisition of the various new businesses and also higher finance costs due to chalking up huge debts. 

I also sense that their operating environment for most of their business segments are still challenging especially their top two revenue and earnings contributors in spirits and beer are still facing decline in profitability even if we exclude the non-recurring costs and expenses related to the acquisitions.

 I think this is something investors in Thai Beverage ought to find out why is there a decline in profitability in theses two top segment contributors even after the mourning period for their Thai King is over. Perhaps their domestic beverage industry is still continuing to face headwinds resulting in sustained decline in profitability though the decline in 2Q18 is not as steep as in 1Q18 as a general whole for Thai Beverage buffered by new contributions to the top line and bottom line through the various new acquisitions. 

Or perhaps some of the new acquisitions have not managed to pull in a good showing yet in their results.

Based on their published results, these are their performance as follows.

2Q18 vs 2Q17
Revenue = +34.3%
Profit attributable to shareholders (excluding non-recurring expenses) = -3.2%
Diluted EPS (excluding non-recurring expenses) = -3.8% 

Profit margin attributable to shareholders = 13% (2Q17) vs 9.3% (2Q18)

1H18 vs 1H17
Revenue = +16.5%
Profit attributable to shareholders (excluding non-recurring expenses) = -17.9% 

Diluted EPS (excluding non-recurring expenses) = -17.9% 

Profit margin attributable to shareholders = 14.7% (1H17) vs 8.1% (1H18)

Breakdown on performance of individual business segments according to their attributable profits (losses) as follows.

2Q18 vs 2Q17 

Only spirits, food and F&N/FPL increased their profits. Food segment though a small contributor of profits increased very significantly in it's profits. Spirits segment which is the most important top contributor only increased profits by 2.8%. The second important profit contributor beer segment decreased significantly in profits by 66.7% while non-alcoholic beverages segment suffered deepening losses.

1H18 vs 1H17
Only food segment increased significantly in profits. All other segments decreased in profits over this period y-o-y. Top most important profit contributor spirits segment decreased by 10.5% in profits. Second important profit contributor beer segment decreased in profits by 40.2%.

In conclusion, I sense that Thai Beverage is still facing challenges in most of it's business segments notably the non-alcoholic segment. 

The top two most important profit contributors the spirits and beer segment also seen a decline in their profitability. But on a general whole, Thai Beverage seemed to see a less steep decline in profitability in 2Q18 than 1Q18 buffered by contributions to top line and bottom line through the various new acquisitions made.

The huge amount of debts they now carry seem to be still a big concern to take note of. However, given the strong generating cashflows in it's businesses, Thai Beverage may still be able to manage this huge debt they now carry.

 They just need to be careful to reduce the debts over time to a manageable level and not do anything stupid to blow things up. The dividends may be reduced in future to allow channeling more retained earnings and cashflows towards reducing debts over time.

On the valuation side at a share price of $0.80, Thai Beverage is now trading at EV/EBITDA of about 16.5 which makes it now super expensive to own due to the huge amount of debts it has taken up.

 The current P/B ratio of about 3.8 also suggest it is expensive to own Thai Beverage based on an average ROE of about 24% (over the past 5 years) and the prospects of ROE falling due to declining profitability in the short to mid-term.

I think It would be better to wait out for their debts to be reduced and earnings to continue to grow from their new acquisitions over time and/or share price to fall to a lower level before it becomes attractively cheap to own.

Maybe that is where a TA view may shade some lights about current share price What is price entry point  whereby the support will be strong and worth considering to accumulate shares of Thai Beverage. But 
on a FA side, I certainly stand by my view that a lower share price at this current point is more attractive than current price to pay for their current fundamentals. I think the market is currently pricing in optimism that things will be running smooth for Thai Beverage going forward meaning that their debts will be reduced and profitability and cashflows will increase going forward. That is what I see now based on the current price support given Thai Beverage by Mr Market.

 The strong support is at 79.5/80. Once broken it may retest the recent low of 78. A rebound may likely happen ! If it cannot hold then it may go down again ! I think Yield will be cut and going lower with higher interest bearings for next 1-2 years . Yield could be hovering at 2.5% or lower . Not attractive as compare to Sheng Siong.

Not a call to buy or sell.

Please do your own due diligence.

Cosco

Cosco - 1Q 2018 Net Profit of $2.8m.
If you look further into their financial report, it stated "Other gains for Q1 2018 were mainly due to foreign exchange gain of $3.0 million".

Also the Share of profit of an associated company of $0.6 million was mainly due to share of profit from newly acquired 40% shareholdings in PT Ocean Global Shipping.

I think is still too early to see how the company will perform well for the next 1-3 quarters.
As also mentioned, the shipping revenue was decreased owing to reduce fleet of 3 bulk carriers.

I think investor may want to look further into their cash flow statement.
I think the cash flow is still showing negative cash in flow.

I think the company recently has taken on a loan of about $300+m.

NAV of 23.07 cents.

Not a call to buy or sell.

Please do your own due diligence.


Highlights: 

• The Group recorded net profit attributable to equity holders of $2.8 million for Q1 2018 as compared to a loss of $78.9 million for Q1 2017. In Q1 2018, the Group transformed into one of Singapore’s leading logistics management service providers with the acquisition of 100% interest in the equity of Cogent Holdings Limited.



• Group turnover from continuing operations increased by 256.1% to $40.6 million for Q1 2018 as compared to Q1 2017 mainly due to turnover of $32.1 million from newly acquired logistics businesses.

• Turnover from shipping revenue decreased owing to a reduced fleet of 3 bulk carriers.



• The increase in cost of sales, distribution, administrative and finance expenses were mainly due to the newly acquired logistics businesses.




COSCO SHIPPING International (Singapore) Co., Ltd., an investment holding company, provides integrated logistics management services in South and Southeast Asia. Its logistics services include transportation management, container depot management, automotive logistics management, warehousing, and property management services. The company also offers ship repair and marine engineering services. In addition, it transports dry bulk cargos comprising grains, iron ore, coal, steel, cement, and fertilizers through operating three bulk carriers. Further, the company engages in the property rental activities. The company was formerly known as COSCO Corporation (Singapore) Limited and changed its name to COSCO SHIPPING International (Singapore) Co., Ltd. in April 2017. COSCO SHIPPING International (Singapore) Co., Ltd. was incorporated in 1961 and is based in Singapore. COSCO SHIPPING International (Singapore) Co., Ltd. is a subsidiary of China Ocean Shipping (Group) Company.

ThaiBev

ThaiBev - 2Q 2018 result Net Profit decrease 3.2% to 6,346 million Baht( exclude non-recurring expenses relating to business acquisition).

EPS is down 3.8% to 0.25 Baht .

1st Half 2018 EBITDA is down 11.67% to 17,487 million Baht.

First Half 2018 Net profit is down 27% to 10,451 million Baht.

First Half EPS is down 35.1% to 0.37 Baht versus 0.57 Baht last year.

NAV is also lowered from S$0.22 to S$0.21.

Dividend has been cut from 20 cents Baht to 15 cents Baht.(a decrease of 25% )

Looking through at the Interest Bearing debts:



They have to allocate 16,784 million Baht for Mar 2019 interest loan.

The 2nd year i.e. After one year but within two years (Mar 2020), the debt amount is super high at 163,766 million Baht.

After two years , 53,967 million Baht.

Total 234,517 million Baht.

I think the debts may likely affect the profitability for the next financial years as well as the following years whereby the interest bearing has more than 10x of year 2019.



It is good to be extra cautious when dealing with this counter.

Not a call to Buy or sell.

Please do your own due diligence.





The recent Acquisitions :

• In the second quarter ended 31 March 2018, the Company completed an acquisition of

• 75% shareholding interest in Havi Logistic Co.,Ltd. (Havi), which operates logistic businesses for food services in Thailand, by Thai Beverage Logistics Co.,Ltd., a wholly owned subsidiary of the Company on 28 February 2018.



• The Company has included the assets and liabilities of Havi in the consolidated statements of financial position and the results of operations and cash flows in the consolidated statement of income and cash flows respectively from March 2018 onwards.

• Havi’s operations were recognized under the food business segment.

• In the first quarter ended 31 December 2017, the Company completed 4 acquisitions of

1. a 76% shareholding interest in Spice of Asia Co.,Ltd. (SOA) on 3 October 2017 to operate 10 stores of restaurants serving hotpot and Thai food



2. a 75% shareholding interest in Myanmar Supply Chain and Marketing Services Co.,Ltd. and Myanmar Distillery Co.,Ltd. (MSC & MDC), which incorporated in the Republic of the Union of Myanmar, on 12 October 2017 to operate spirits business in Myanmar

3. 252 existing KFC stores in Thailand by The QSR of Asia Co.,Ltd. (QSA), a wholly-owned subsidiary of the Company on 1 December 2017



4. a 53.59% shareholding interest in Saigon Beer – Alcohol – Beverage Joint Stock Corporation (Sabeco), a company incorporated in The Socialist Republic of Vietnam and currently listed in Ho Chi Minh Stock Exchange (HOSE), on 29 December 2017 to operate mainly in beer business

Yanlord

Yanlord - These are my thoughts on Yanlord Land.

NAV $2.252 PE of 5.735x dividend of 6.8 cents.XD 18th May

Yield is about 4%

Current price $1.67

YANLORD PROFIT FOR THE PERIOD RISES 22.4% TO RMB1.796 BILLION

 Revenue in 1Q 2018 rose 13.7% to RMB7.188 billion on higher average selling price (“ASP”) achieved. Underscored by the continued delivery of higher grossprofit-margin projects across the Group’s core markets, gross profit in 1Q 2018 rose 28.1% to RMB4.004 billion while gross profit margin expanded to 55.7% in 1Q 2018 compared to 49.5% in 1Q 2017.



 Healthy market sentiments in the PRC propelled the Group’s pre-sale accumulation in 1Q 2018. Accumulated pre-sale pending recognition as at 31 March 2018 was RMB18.197 billion with advances received for pre-sales properties of RMB16.602 billion.

 The Group continues to maintain a healthy financial position with cash and cash equivalents position of RMB16.235 billion as at 31 March 2018.



 Subsequent to the end of the period, Yanlord announced its homecoming to Singapore with the successful joint bid for the freehold Tulip Garden development for S$906.9 million. The Group has also entered into a strategic collaboration with a state owned enterprise to oversee the project management of approximately 1,740 rental housing units in Shanghai.

Yanlord Land is moving towards retaining more properties they have developed for recurring rental income. This should help to stabilize their profitability better over time as property developers tend to experience lumpy revenues and earnings due to the timing of recognition of revenues and earnings on developed properties.

I looked at the growth of Yanlord over the past 6 years period from 2011 to 2017. The revenues have grown at a CAGR of 19.09% over this period.

The operating profits have grown at a CAGR of 23.31% over this period. The diluted EPS have grown at a CAGR of 15.34% over this period.

 The various profit margins have fluctuated through the period under consideration. However, last year 2017 was a good year for Yanlord with high margins property projects locked in their sales and thus the various margins have improved significantly y-o-y.

The challenge is whether such high profit margins done last year can be repeated this year as well or not. They do have many property projects on hand this year and their chairman guided this year they should be able to perform well too with the current growth in the property development industry in China with many cities in China still undergoing development.



Yanlord Land is also moving into more property projects in tier-1 and tier-2 China cities where these projects carry higher profit margins.( quote : jeremyowtaip)

 I shall not look at the cashflows trend as the cashflows can swing between positive and negative in any single year due to the movement of cash according to the amount of cash outflows on properties under development in any year and amount of cash inflows from sales of completed properties which either item could be a huge amount affecting the cashflows significantly in any single year.

 This makes determining an accurate growth for the cashflows difficult. However, generally speaking, the amounts of net operating cashflows and free cashflows have grown over this period. Yanlord had a debt to equity ratio of 70% in 2011. Their debt to equity ratio is 105% in 2017.

 They seem to have geared up for last year. However, if we look at their net debt to equity ratio, it was 52% in 2011 and in 2017 was 51%. They seem to have maintained their net debt to equity ratio at about this level. Perhaps this is a good safe level to them to maintain their net debt to equity with some cash and equivalents on hand despite taking on a higher debt position in 2017 for expansion and growth.



 The average asset turnover for Yanlord has improved from about 0.19 to 0.26 over this past 6 years period. The returns on assets were maintained at slightly over 3%, returns on equity improved from 10 over % to 14 over % while returns on invested capital have improved marginally from slightly over 6% to now about close to 7%.

 If we just look at Yanlord alone as it is, it seems that it has performed well over the past 6 years with double digits CAGR in revenues, operating profits and diluted EPS. I shall compare Yanlord with two other China property developers on some of the metrics

I use above over the same past 6 years period.



 The two other China property developers are China Vanke and China Overseas Land & Investment Ltd.

 Selected comparison metrics between Yanlord Land (YL), China Vanke (CV) and China Overseas Land & Investment Ltd (COLI)

Revenue CAGR = YL (19.09%), CV (22.53%), COLI (20.77%)

 Operating profit CAGR = YL (23.31%), CV (20.54%), COLI (16.25%)

 Diluted EPS CAGR = YL (15.34%), CV (19.3%), COLI (13.76%)

 Debt to equity ratio (FY17) = YL (105%), CV (102%),



COLI (65%) Average asset turnover (FY17) = YL (0.26), CV (0.24), COLI (0.27)

 ROA (FY17) = YL (3.22%), CV (2.81%), COLI (6.7%)

 ROE (FY17) = YL (14.69%), CV (22.8%), COLl (16.71%)

 ROIC (FY17) = YL (6.67%), CV (10.2%), COLI (9.91%)



 Yanlord Land seems to stack up well against the other two well known reputable China developers even though the former maybe much smaller in scale of operations. The only thing Yanlord Land seems to fall behind is the return on equity and return on invested capital.



However, Yanlord Land has improved it's returns on equity and returns on invested capital over the past few years. This seems to suggest it has shown an ability to generate improving returns over the past few years to catch up with other larger competitors in China. In conclusion, I find Yanlord Land is worth considering as an investment in China property industry.

The growth in China property market seems evident as these few China property developers are enjoying good double digits CAGR in their profitability and generating good returns. Based on last closed share price of $1.68, Yanlord Land is now at EV/EBITDA of about 3.6x which is undervalued (Any value 5x and below is cheaply attractive).



 It's P/B ratio is about 0.7. Since Yanlord Land has already improved it's ROE from single digits to above 10% since 2016 and 2017, trading at a P/B ratio of 0.7 is pricing it too cheap. Therefore, I think at current share price of $1.68, Yanlord Land could be viewed as undervalue. This is especially true should it continue to produce a good set of results this year same as last year too. Not a call to buy or sell. Please do your own due diligence.



 Yanlord Land Group Limited, an investment holding company, engages in the property development activities in the People's Republic of China. The company operates through Property Development, Property Investment, and Others segments. It develops residential properties comprising apartment complexes and villas; and commercial and integrated properties, such as offices, serviced apartments, and shopping malls for sale and lease.



The company also offers property management services for residential properties, including security, building, equipment maintenance and repair, facilities management, child-care, and other ancillary services, as well as organizes social and residential community functions. In addition, it is involved in the management of hotels and serviced apartments; trading of building materials and hardware; operation of restaurants and Kindergarten; and installation, maintenance, sale, and repair of elevators. Further, the company engages in the provision of landscaping and gardening, management and investment, city redevelopment, food and beverage, tourism investment, asset management, leisure and fitness, education and training, and construction engineering services, as well as tourism and travel services. Yanlord Land Group Limited was founded in 1993 and is based in Singapore.

Ying Li Intl

Ying Li - 1st Quarter result just out today . Total comprehensive profit of RMB 3.319m versus last year loss of -$7438.

The profit was achieved due to lower foreign currency translation differences of RMB -1.5m versus RMB -28.74m .

If not, result would be quite bad .



NAV of 32 cents.
Rolling PE of 17x.

Cash flow seems to be in negative outflow . I think investor might want to study further into the details of their cash flow level.

From TA wise, it is trading in a consolidation mode . Would this result be able to bring cheers to the price !

It would need a nice break out of 14.2 cents in order to rise higher towards 15 cents and above .



Not a call to buy or sell

PlwPle do your own due diligence.



Ying Li International Real Estate Limited, an investment holding company, engages in the development, sale, rental, management, and ownership of commercial and residential properties under the Ying Li brand in the People’s Republic of China. It operates through Property Investment, Property Development, and Others segments. The company primarily develops residential, office, retail mall, storage and car park, and other projects. It also engages in the provision of property consulting, selling, marketing, management, and leasing services, as well as car parking services; and purchase of construction material and equipment. The company has a strategic cooperative partnership with China Everbright Limited. Ying Li International Real Estate Limited was founded in 1993 and is based in Singapore

StarHub

StarHub - looking through their financial nos, Net Income has been dropping from 370M of 2014 to 238m in 2017.

Dividend has been cut from 20 cents to 16 cents.

The latest 1Q 2018 result also shown a drop of 13% for the Net profit down from 72m to 63m.

Net profit is still dropping and not sure when will we be able to see a good improvement for the company to boost their Net income revenue!

Business Outlook:


➢ Revenue: Maintain service revenue to be 1% to 3% lower YoY

➢ Service EBITDA*: Expect service EBITDA margin to be between 27 - 29% after adoption of SFRS(I) 15

➢ CAPEX: Maintain cash capex to be about 11% of total revenue (excludes spectrum and building payments)

➢ Dividend: Declare an interim quarterly dividend of 4.0 cents per ordinary share for 1Q2018 Intend to pay a quarterly cash dividend of 4.0 cents per ordinary share for FY2018


*Service EBITDA refers to EBITDA less equipment margin (Sales of Equipment less Cost of Equipment)

Free Cash flow has also been drifting lower as reflected on the chart below:

From TA point of view, it is on a long term down trend mode as reflected on the chart.

After going ex-dividend 2 days ago, it has continued to drop lowered from $2.26 to close at $2.18 level. The dropping of 8 cents is more than the 4 cents dividend . This is rather negative.

Short term wise , it is still rather weak and we may see further selling down pressure.
Immediate resistance is at $2.10. Breaking down of $2.10 level with high volume, it may likely continue to slide down further towards $2.00 with extension to 1.91.



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