I was puzzled by Etika share price for past two days, it keep going up for no apparent reason. The answer is out now. Templeton fund is subscribing to the convertible bond that the company issues. The conversion price is 1.05 which is higher than current share price. However, if you look at the long term and potential of the company, it is very cheap. The company is trading at prospective PE of 9. If the earning does grow strongly, my estimate that it is going to worth a lot more.
That's the exciting part of investing in small cap. It is possible to get multi bagger faster if the company is able to grow strongly.
Showing posts with label company result. Show all posts
Showing posts with label company result. Show all posts
Tuesday, 3 August 2010
Friday, 13 February 2009
FJ Benjamin FY09 Q2 result
FJ Benjamin just announced the Q2 result for FY09.
Turnover -10%
Gross profit -14%
Other income -66%
Rental +10%
Operating profit -53%
>> Retailer seems to be caught in situation where there is plunge of sales but rental keep going up.
Forex loss of 2,345,000
Net profit -93% to 611,000 only
>> The luxury sector really get hit when economy turns bad.
Current liabilities (in '000)
Trade and other creditors 74,183
Bank borrowing 58,358
Debt repayable within one year 58,389
Minus cash on hand, outstanding debt 37,392
Cash before working capital 3,500
Cash used in operation 13,332
Cash at end of period 11,150
>> Cash are locked out in two items - increase in debtors and stocks. The negative cashflow is really a cause of concern.
EPS for Q2 0.11
According to explanation, profit -53% plus unrealised non-cash forex loss of 2.3mil for trade payable and other balance. At current economic situation, the forex fluctuation is going to be constant issue. Margin decreased slightly as promotional activities increased. The group business affected by the downturn, as consumer cut back spending, and promotional activities increased. Revenue in China -35%.
It is really not time for retailer, many thought that luxury sector should be less affected, but it is not. The negative cashflow is really a big concern to me, especially time is bad now. Assume EPS remain same across quarter, full year EPS would be 0.44. But this figure is not so meaningful, since the business would keep deterior affected by consumer willingness to spend.
Turnover -10%
Gross profit -14%
Other income -66%
Rental +10%
Operating profit -53%
>> Retailer seems to be caught in situation where there is plunge of sales but rental keep going up.
Forex loss of 2,345,000
Net profit -93% to 611,000 only
>> The luxury sector really get hit when economy turns bad.
Current liabilities (in '000)
Trade and other creditors 74,183
Bank borrowing 58,358
Debt repayable within one year 58,389
Minus cash on hand, outstanding debt 37,392
Cash before working capital 3,500
Cash used in operation 13,332
Cash at end of period 11,150
>> Cash are locked out in two items - increase in debtors and stocks. The negative cashflow is really a cause of concern.
EPS for Q2 0.11
According to explanation, profit -53% plus unrealised non-cash forex loss of 2.3mil for trade payable and other balance. At current economic situation, the forex fluctuation is going to be constant issue. Margin decreased slightly as promotional activities increased. The group business affected by the downturn, as consumer cut back spending, and promotional activities increased. Revenue in China -35%.
It is really not time for retailer, many thought that luxury sector should be less affected, but it is not. The negative cashflow is really a big concern to me, especially time is bad now. Assume EPS remain same across quarter, full year EPS would be 0.44. But this figure is not so meaningful, since the business would keep deterior affected by consumer willingness to spend.
Tuesday, 19 August 2008
China Sports International 2008 Q2 result
It is interesting to evaluate other sports player result also. Following is the China Sports International result for Q2.
Revenue +50%
Cost of sales +49.9% (in sync with revenue)
Selling and distribution expense +281.5%
Administrative expense +387.3%
Profit before tax increased only 25.7% as a result of high expenses incurred. The group is probably trying to put resource to grow faster.
Group has no debt
Look at cashflow statement, profit before tax +25.7%
Net cash generated from operation 123,932k RMB.
Minimum cash used in investing and financing activities
Cash at end of period 535,293k RMB. Strong cash position would allow them to grow aggresively.
Q2 EPS number fall from 9.92cts to 8.7cts. But this should not be a cause of concern, since company is newly listed and this is calculated using pre-invitation shares.
Revenue increase is evident. The cash raised during IPO was put into work and allow faster growth. The widen distribution network also contribute to the significant increase of operating expenses. This is normal. The rise of average selling price is a good sign the brand is gaining traction. OEM business seems to be getting the margin squeeze. Building own brand is the way to go.
The group believe that the Beijing Olympic would raise the sports awareness and contribute to long term growth of sports sector. This might be true, but we are not sure whether there is olympics overhang. Since the group was doing OEM for Kappa, they are into the fashion sports segment currently. I once read few reports about the fashion sports niche which Kappa is doing really well. People treat sports shoe as part of the fashion. The group is focusing on this niche but is really a small player in this aspect, although story looks promising. The tie up with sohu and CCTV might further raise the brand awareness. In overall, the prospect looks bright, but bear in mind of their size.
Looking at current market condition, everything is cheap. Investor can afford to cherry pick good deal. Let's assume this quarter of EPS 8.7cts is consistent across all quarters – 34.8cts RMB. This translate to 7.15cts SGD. At today closing of 0.32, it selling at PE of 4.47 only! What a steal. However, keep in mind the current market sentiment, china share situation and the inflation environment, one might choose to go in or wait for a while.
Revenue +50%
Cost of sales +49.9% (in sync with revenue)
Selling and distribution expense +281.5%
Administrative expense +387.3%
Profit before tax increased only 25.7% as a result of high expenses incurred. The group is probably trying to put resource to grow faster.
Group has no debt
Look at cashflow statement, profit before tax +25.7%
Net cash generated from operation 123,932k RMB.
Minimum cash used in investing and financing activities
Cash at end of period 535,293k RMB. Strong cash position would allow them to grow aggresively.
Q2 EPS number fall from 9.92cts to 8.7cts. But this should not be a cause of concern, since company is newly listed and this is calculated using pre-invitation shares.
Revenue increase is evident. The cash raised during IPO was put into work and allow faster growth. The widen distribution network also contribute to the significant increase of operating expenses. This is normal. The rise of average selling price is a good sign the brand is gaining traction. OEM business seems to be getting the margin squeeze. Building own brand is the way to go.
The group believe that the Beijing Olympic would raise the sports awareness and contribute to long term growth of sports sector. This might be true, but we are not sure whether there is olympics overhang. Since the group was doing OEM for Kappa, they are into the fashion sports segment currently. I once read few reports about the fashion sports niche which Kappa is doing really well. People treat sports shoe as part of the fashion. The group is focusing on this niche but is really a small player in this aspect, although story looks promising. The tie up with sohu and CCTV might further raise the brand awareness. In overall, the prospect looks bright, but bear in mind of their size.
Looking at current market condition, everything is cheap. Investor can afford to cherry pick good deal. Let's assume this quarter of EPS 8.7cts is consistent across all quarters – 34.8cts RMB. This translate to 7.15cts SGD. At today closing of 0.32, it selling at PE of 4.47 only! What a steal. However, keep in mind the current market sentiment, china share situation and the inflation environment, one might choose to go in or wait for a while.
Saturday, 9 August 2008
Celestial Nutrifood 2008 Q2 result
Soy bean price has risen a lot together with other commodity price. Let's look at how Celestial is doing.
Sales +37.1%
Cost of sales +46.5%
Gross profit +22.2% (cost increase faster than sales)
Distribution and Administrative expenses +53.8% and +44.3% respectively
Income tax +50%
Net profit +11.7% (clearly the high cost and tax weight the profit down)
Cashflow before working capital change +14.7% (the business is generating strong cash)
EPS increase slightly to 0.17 RMB
When we look at the sales mix, the industrial product sales grow faster. Gross profit margin dropped because of the higher raw material price and change of sales mix. Group has put in measure to mitigate the cost pressure. Selling price of most health food and beverage increased more than 20%, yet it still achieve growth, this might signal better pricing power.
There is increased plant utilisation of industrial protein business. Biochemical feedstuff and lecithin business also achieved strong growth. The component of cost increase include advertising and promotion, transportation and other distribution expense. The intense competition could be another reason. The administrative expense include donation to Sichuan earthquake, otherwise it would be lower. Increase in income tax also erode the earning.
The directors believed high raw material cost continue be a concern. The group is to launch four new health food and beverage in 2008.
The group continue to grow despite rising raw material cost. They also managed to increase price without affect the sales severely. Overall, it is a good result. Since the price of commodity is on down trend now, there is high change Celestial would do even better in the coming quarter. It does look interesting at this level.
Sales +37.1%
Cost of sales +46.5%
Gross profit +22.2% (cost increase faster than sales)
Distribution and Administrative expenses +53.8% and +44.3% respectively
Income tax +50%
Net profit +11.7% (clearly the high cost and tax weight the profit down)
Cashflow before working capital change +14.7% (the business is generating strong cash)
EPS increase slightly to 0.17 RMB
When we look at the sales mix, the industrial product sales grow faster. Gross profit margin dropped because of the higher raw material price and change of sales mix. Group has put in measure to mitigate the cost pressure. Selling price of most health food and beverage increased more than 20%, yet it still achieve growth, this might signal better pricing power.
There is increased plant utilisation of industrial protein business. Biochemical feedstuff and lecithin business also achieved strong growth. The component of cost increase include advertising and promotion, transportation and other distribution expense. The intense competition could be another reason. The administrative expense include donation to Sichuan earthquake, otherwise it would be lower. Increase in income tax also erode the earning.
The directors believed high raw material cost continue be a concern. The group is to launch four new health food and beverage in 2008.
The group continue to grow despite rising raw material cost. They also managed to increase price without affect the sales severely. Overall, it is a good result. Since the price of commodity is on down trend now, there is high change Celestial would do even better in the coming quarter. It does look interesting at this level.
Wednesday, 6 August 2008
China Hongxing 2008 Q2 result
The quarterly reporting season is back. It is number crunching time.
Revenue +53.1%
Gross profit +53.8
Selling and distribution expense +83% (so high)
Income tax +108%
Profit for shareholder +31% (obviously the cost and tax weight the profit down)
Bank balance 2,201,588k RMB vs current liabilities 227,954k RMB (more than enough to cover the liabilities)
There is an increasing cashflow to 150,676k RMB. But after adjusting receivables, there is net cash outflow from operating activities. Not a big problem, since company has so much cash.
EPS increased to 4.37 RMB cent, growth of 8.7%
Apparel and accessories sales is catching up. There is a decrease of gross margin. Expenses increased in line with outlet expansion and promotion activities. The environment is still favourable for sporting goods, but the group is mindful of the inflation situation which could affect the raw material price.
The growth is still on track, strong growth is still expected. I am assuming they would continue to growth at the 30% rate per year. However, inflation has indeed caught up with many China companies now. I still prefer company with strong brand like hongxing. There is the only way to mitigate the cost pressure. They are having some Olympic advertising, hopefully it would raise further awareness on the group's product. The sporting good bull seems to still going strong.
Consider the quarterly earning of 4.37 cents. Full year EPS should be 17.48 cents, which is 3.51 SGD cents. At today's closing of 0.49, it is selling at forecast PE of 13.9. If the earning accelerated, we are looking at even lower PE. I think it is quite reasonable for a company with high growth. If we compare the expected growth rate of 30% against this PE, it is really cheap. Of course, the market is going through the PE compression. To invest or not, depends on whether you are taking long term view of the business.
Revenue +53.1%
Gross profit +53.8
Selling and distribution expense +83% (so high)
Income tax +108%
Profit for shareholder +31% (obviously the cost and tax weight the profit down)
Bank balance 2,201,588k RMB vs current liabilities 227,954k RMB (more than enough to cover the liabilities)
There is an increasing cashflow to 150,676k RMB. But after adjusting receivables, there is net cash outflow from operating activities. Not a big problem, since company has so much cash.
EPS increased to 4.37 RMB cent, growth of 8.7%
Apparel and accessories sales is catching up. There is a decrease of gross margin. Expenses increased in line with outlet expansion and promotion activities. The environment is still favourable for sporting goods, but the group is mindful of the inflation situation which could affect the raw material price.
The growth is still on track, strong growth is still expected. I am assuming they would continue to growth at the 30% rate per year. However, inflation has indeed caught up with many China companies now. I still prefer company with strong brand like hongxing. There is the only way to mitigate the cost pressure. They are having some Olympic advertising, hopefully it would raise further awareness on the group's product. The sporting good bull seems to still going strong.
Consider the quarterly earning of 4.37 cents. Full year EPS should be 17.48 cents, which is 3.51 SGD cents. At today's closing of 0.49, it is selling at forecast PE of 13.9. If the earning accelerated, we are looking at even lower PE. I think it is quite reasonable for a company with high growth. If we compare the expected growth rate of 30% against this PE, it is really cheap. Of course, the market is going through the PE compression. To invest or not, depends on whether you are taking long term view of the business.
Monday, 4 August 2008
Hongguo 2008 Q2 result
Hongguo just released the Q2 result of the year.
Revenue +13% to 188,128k RMB
Cost of sales only increased 6%
Gross profit +23%
But the selling and distribution cost +34% and administrative expense +18%
As the result, profit for quarter only +4%
Cashflow remain healthy but after consider the working capital, cashflow is negative
EPS only increased 4% to 7.03 RMB cents
Gross margin improved from 41.6% to 45.2% implying stronger brand value. Due to the expansion and hiring of staff, the cost escalated. The result is quite a disappointment from me, since the EPS growth is only 4%. Although this looks like one off expense resultant from the expansion strategy. But the high inflation in China might have already caught many companies in surprise.
Company is to continue with the retail expansion and might introduce a new brand. Assuming the cost would stable in the second half of the year. Assume quarterly earning does not grow much, full year EPS is 4 x 7.03 cents = RMB 28 cents = SGD 5.6 cents. Currently, it is selling at 0.36, which means PE of 6. Still a buy. When the market recover, the stock you bought at this kind of depressed level should give a good return.
Revenue +13% to 188,128k RMB
Cost of sales only increased 6%
Gross profit +23%
But the selling and distribution cost +34% and administrative expense +18%
As the result, profit for quarter only +4%
Cashflow remain healthy but after consider the working capital, cashflow is negative
EPS only increased 4% to 7.03 RMB cents
Gross margin improved from 41.6% to 45.2% implying stronger brand value. Due to the expansion and hiring of staff, the cost escalated. The result is quite a disappointment from me, since the EPS growth is only 4%. Although this looks like one off expense resultant from the expansion strategy. But the high inflation in China might have already caught many companies in surprise.
Company is to continue with the retail expansion and might introduce a new brand. Assuming the cost would stable in the second half of the year. Assume quarterly earning does not grow much, full year EPS is 4 x 7.03 cents = RMB 28 cents = SGD 5.6 cents. Currently, it is selling at 0.36, which means PE of 6. Still a buy. When the market recover, the stock you bought at this kind of depressed level should give a good return.
Tuesday, 29 July 2008
Oceanus, first glance
Oceanus released the 1st half result of 2008.
Sales surged 349% to RMB 181.4m
Profit before tax and goodwill up 303% to RMB180.4m
Plan to triple production capacity to 40,000 tanks in next 18 months
The group is specialised in producing premium Japanse Abalone in China. Accordingly, the cost is under control and group has cost advantage against the competitors. The group recorded a goodwill write off due to the RTO it has undertaken. This is an accounting item and does not affect cashflow.
The outlook remain robust and due to the shortage of wild abalone, the group is ramping up the production capacity quickly. The plan is to grow the capacity quickly and move into downstream processing to improve the margin.
The group looks interesting to me right from the beginning. These are the interesting points:
Chinese consumption of abalone is set to grow strongly
The group is one of the top producer and plan to grow capacity rapidly
Plan to move to downstream to capture even higher market share
Things look rosy for the group in the coming years. But the risk with agri stock remained. Comparing the current valuation against the projected growth, it does look attractive. More research needs to be done to uncover the competitive advantage and more facts.
Sales surged 349% to RMB 181.4m
Profit before tax and goodwill up 303% to RMB180.4m
Plan to triple production capacity to 40,000 tanks in next 18 months
The group is specialised in producing premium Japanse Abalone in China. Accordingly, the cost is under control and group has cost advantage against the competitors. The group recorded a goodwill write off due to the RTO it has undertaken. This is an accounting item and does not affect cashflow.
The outlook remain robust and due to the shortage of wild abalone, the group is ramping up the production capacity quickly. The plan is to grow the capacity quickly and move into downstream processing to improve the margin.
The group looks interesting to me right from the beginning. These are the interesting points:
Chinese consumption of abalone is set to grow strongly
The group is one of the top producer and plan to grow capacity rapidly
Plan to move to downstream to capture even higher market share
Things look rosy for the group in the coming years. But the risk with agri stock remained. Comparing the current valuation against the projected growth, it does look attractive. More research needs to be done to uncover the competitive advantage and more facts.
Tuesday, 6 May 2008
China Oilfield Tech FY08Q1 result
I do not own the share of China Oilfield, but I did study a little bit about the company during the IPO time. Basically, it has an interesting business. That is to use the tertiary oil recovery technique to extract more oil from the mature oil well and their main business is focusing on Daqing area.
Today I saw this research report regarding the company for FY08Q1. Main points:
- No revenue
- RMB15million loss, 10million for stock option grant expense
- 2H for 80% of full year turn over
- little earning visibility
The stock expense is more accounting related and does not affect the cashflow. That means you could loss money but there is no cash outflow incurred for the company. Likewise for company which report earning increase, but there is no cash coming into the company really.
Lumpy earning is too much to my liking. Investor has to ask himself how much he understand about the company business model and whether can make an educated and reliable forecast of the earning.
Today I saw this research report regarding the company for FY08Q1. Main points:
- No revenue
- RMB15million loss, 10million for stock option grant expense
- 2H for 80% of full year turn over
- little earning visibility
The stock expense is more accounting related and does not affect the cashflow. That means you could loss money but there is no cash outflow incurred for the company. Likewise for company which report earning increase, but there is no cash coming into the company really.
Lumpy earning is too much to my liking. Investor has to ask himself how much he understand about the company business model and whether can make an educated and reliable forecast of the earning.
Tuesday, 29 April 2008
Hongguo FY08 Q1 result
Figures are provided for Q1
Revenue +27.32%
Gross profit +34.38%
Selling and distribution cost +66.09%
Net profit +16.06% at 34m RMB
If not the substantial higher selling and distribution cost, this would be another good quarter. Compare to last full year result, it is showing sign of escalation. It is not discussed in the result announcement that what is the significant contributor to this cost increase. Are they promoting the brand more aggressively or the rising inflation in China significantly lift the cost?
Cashflow remain strong, but trade receivable increased. Gross margin increased to 41.61% which generally signal the brand position. The group expansion strategies have remained the same
1)Retail store expansion
2)Multi brand strategy
It is yet to see whether the cost would go out of control. Looking at the Q1 growth percentage of 16%, let's assume full year would be at the same rate. The forecast EPS would be 0.32 RMB. Today it closed at 0.52, which means trading at forward PE of 8. Still consider cheap, but I would rather wait to see the cost trend. However, if the general market improves, it might still fly.
My china friend said he saw mainly Daphne stores in the cities he visited. Hongguo still has a lot of catch up to do.
***Updated 30 Apr 2008
Some comments from analyst.
DBS:
Maintain BUY, TP S$0.94 based on 12x FY09 PER.
DMG:
The Group’s strategy for growth is to continue expanding its sales network. Hongguo plans to set up 200 new outlets for C.Banner and E.Blan, and 40 new outlets for Naturalizer by 4Q08. Coupled with a stronger design capability and greater production capacity, revenue is expected to continue to grow. We maintain our BUY recommendation for a target price of S$0.60.
Westcomb:
Maintain BUY with target price of S$0.82 – HGUO is currently trading at S$0.52, a historical FY07 P/E of 9.6x. We consider HGUO to be relatively undervalued as compared to peers China Hongxing Sports Ltd (CHHS:SP; P/E of 16.7x) and Li Ning Co. Ltd (2331:HK; P/E of 45.3x).
Revenue +27.32%
Gross profit +34.38%
Selling and distribution cost +66.09%
Net profit +16.06% at 34m RMB
If not the substantial higher selling and distribution cost, this would be another good quarter. Compare to last full year result, it is showing sign of escalation. It is not discussed in the result announcement that what is the significant contributor to this cost increase. Are they promoting the brand more aggressively or the rising inflation in China significantly lift the cost?
Cashflow remain strong, but trade receivable increased. Gross margin increased to 41.61% which generally signal the brand position. The group expansion strategies have remained the same
1)Retail store expansion
2)Multi brand strategy
It is yet to see whether the cost would go out of control. Looking at the Q1 growth percentage of 16%, let's assume full year would be at the same rate. The forecast EPS would be 0.32 RMB. Today it closed at 0.52, which means trading at forward PE of 8. Still consider cheap, but I would rather wait to see the cost trend. However, if the general market improves, it might still fly.
My china friend said he saw mainly Daphne stores in the cities he visited. Hongguo still has a lot of catch up to do.
***Updated 30 Apr 2008
Some comments from analyst.
DBS:
Maintain BUY, TP S$0.94 based on 12x FY09 PER.
DMG:
The Group’s strategy for growth is to continue expanding its sales network. Hongguo plans to set up 200 new outlets for C.Banner and E.Blan, and 40 new outlets for Naturalizer by 4Q08. Coupled with a stronger design capability and greater production capacity, revenue is expected to continue to grow. We maintain our BUY recommendation for a target price of S$0.60.
Westcomb:
Maintain BUY with target price of S$0.82 – HGUO is currently trading at S$0.52, a historical FY07 P/E of 9.6x. We consider HGUO to be relatively undervalued as compared to peers China Hongxing Sports Ltd (CHHS:SP; P/E of 16.7x) and Li Ning Co. Ltd (2331:HK; P/E of 45.3x).
Sunday, 16 March 2008
The sweet tooth - China Lifestyle FY07 result
Sales +23.5%
Cost of sales +24.9%
Gross profit +21.2%
Profit before tax +10.5% (Significant increase of administrative and finance expense)
Profit after tax +3.5% (Income tax +32%)
Borrowing at 20,000K
ROE at 18.9% (86,741/458,589)
From cashflow statement (figure in '000),
Profit increased from 83,839 to 86,741, but operating cashflow increased from 125,314 to 145,217. This is due to a few adjustments. But the core profit cashflow didn't increase significantly. Where does the cash from adjustment came from?
Net cash go from 200,578 to 48,088 due to purchase of property, plant and equipment. Still able to cover the borrowing.
EPS decreased to 0.17 RMB from 0.19 RMB. Profit increased slightly but there is dilutive impact from the share option.
Although the sales increased significant, but the cost increase is even greater. Big increase at advertising and promotion expense and there are significant items like exchange loss and disposal on property, plant and equipment(quoted as one off item). Constraint on jelly dessert sales, and significant jump on candy sales. Gross profit margin 39.2% and the raw material price increase remain challenging.
FY07 probably is a consolidation year where they build the brand name, expand production capability and lay the foundation for future growth. Management expect new production facility to ease constraint and more product choice to drive more earning growth. I thought this is a disappointing result where cost increased faster than sales and I don't understand why the core profit cashflow only increased marginally. Given the continue rising of raw material price and uncertain advertising effect, best is to avoid for now.
Cost of sales +24.9%
Gross profit +21.2%
Profit before tax +10.5% (Significant increase of administrative and finance expense)
Profit after tax +3.5% (Income tax +32%)
Borrowing at 20,000K
ROE at 18.9% (86,741/458,589)
From cashflow statement (figure in '000),
Profit increased from 83,839 to 86,741, but operating cashflow increased from 125,314 to 145,217. This is due to a few adjustments. But the core profit cashflow didn't increase significantly. Where does the cash from adjustment came from?
Net cash go from 200,578 to 48,088 due to purchase of property, plant and equipment. Still able to cover the borrowing.
EPS decreased to 0.17 RMB from 0.19 RMB. Profit increased slightly but there is dilutive impact from the share option.
Although the sales increased significant, but the cost increase is even greater. Big increase at advertising and promotion expense and there are significant items like exchange loss and disposal on property, plant and equipment(quoted as one off item). Constraint on jelly dessert sales, and significant jump on candy sales. Gross profit margin 39.2% and the raw material price increase remain challenging.
FY07 probably is a consolidation year where they build the brand name, expand production capability and lay the foundation for future growth. Management expect new production facility to ease constraint and more product choice to drive more earning growth. I thought this is a disappointing result where cost increased faster than sales and I don't understand why the core profit cashflow only increased marginally. Given the continue rising of raw material price and uncertain advertising effect, best is to avoid for now.
Strong cotton - Hongwei Technologies FY07 result
Revenue +41.1%
Cost of sales +39.6%
Profit after tax +30.2% (+163.8% of income tax)
Bank loan 45,000K
Cash generated +21.3%
Cash at end of year 130,840K (should be enough to cover loan)
EPS RMB 0.2889 +14% (dilutive effect of share placement)
For FY07, they issued new share to fund the expansion. As the factory is still under construction, there is a dilutive impact to the EPS. Synthetic cotton was the star performer. Gross profit margin increased to 30% from 29%. This is remarkable since the oil price has increased substantially. The new factory for synthetic cotton would be ready in second quarter of 2008, they expect the gross margin to improve.
This is generally a good result as revenue rise strongly and they manage to keep the cost down. Since the new production capability is going to come online soon, it would enhance the profitability. What I afraid is the margin erosion as oil price keep charging ahead. I think this is the major reason for the share price to under perform for so long. All the fiber related stock is trading at great discount. Assume they are able to increase EPS by 10% next year, which in my opinion should be achievable, the EPS would be 0.3178 RMB. At current price of 0.28, it is only trading at forward PE of 4.4 which I think is cheap in any measure. However, consider on the company size and uncertain oil price, it is not clear where it would go. If you are a deep value investor, this is a buy, otherwise a hold.
Cost of sales +39.6%
Profit after tax +30.2% (+163.8% of income tax)
Bank loan 45,000K
Cash generated +21.3%
Cash at end of year 130,840K (should be enough to cover loan)
EPS RMB 0.2889 +14% (dilutive effect of share placement)
For FY07, they issued new share to fund the expansion. As the factory is still under construction, there is a dilutive impact to the EPS. Synthetic cotton was the star performer. Gross profit margin increased to 30% from 29%. This is remarkable since the oil price has increased substantially. The new factory for synthetic cotton would be ready in second quarter of 2008, they expect the gross margin to improve.
This is generally a good result as revenue rise strongly and they manage to keep the cost down. Since the new production capability is going to come online soon, it would enhance the profitability. What I afraid is the margin erosion as oil price keep charging ahead. I think this is the major reason for the share price to under perform for so long. All the fiber related stock is trading at great discount. Assume they are able to increase EPS by 10% next year, which in my opinion should be achievable, the EPS would be 0.3178 RMB. At current price of 0.28, it is only trading at forward PE of 4.4 which I think is cheap in any measure. However, consider on the company size and uncertain oil price, it is not clear where it would go. If you are a deep value investor, this is a buy, otherwise a hold.
Wednesday, 27 February 2008
Synear – Expensive pork expensive lesson
After Synear announced the FY07 result, market has rewarded it with big sell down and many broker downgrade. Key reason is the result below expectation. We have to admit that buying stock is based on rule of expectation. When company outperform the expectation, share price increases. Otherwise, it is the other way. Imagine that I bought a few lot at well above 2+, you should know what expensive lesson means.
However, faith is not lost yet. I still believe the brand name is superior and the consumer trend. Here are some analyst take. If you have believed them blindly, the result is guaranteed to be disastrous. Have your independent view and judgment. I think many time, stock with cheap valuation should be safer than expensive one. Although, in short term, I expect more fluctuation.
SYNEAR, cimb maintain TRADING SELL with target price $1.14($1.75)
SYNEAR, db maintain BUY with target price $2.19
SYNEAR, ml maintain SELL
SYNEAR, uob maintain BUY with target price $1.74($2.45)
Assessment of full year result:
Revenue +18.9% (4th Q only +1.3%)
4th Q profit actually decreases
Full year EPS RMB 35.5cts -4.3%
Full year cashflow increased strongly from 289,850 to 514,373
Little bank borrowing
Dividend RMB0.0727
The fourth quarter result is why the bearishness. Because the growth trend has some what being broken.
The increase of distribution point and higher selling price was offset by raw material cost, higher selling & distribution cost. Main reasons for higher cost are intensified competition and severe winter which affect the business.
Future expansion plan intact – Building more factories, warehouse to increase production capacity. Future earning depends on the raw material cost to come down, launch of new product, increase of selling price and increase of production capacity. Things should clear up at 3Q. Assume 10% earning growth next year at RMB 39cts. At current price of 0.70, PE is 8.9 only. HOLD. Buy on weakness.
However, faith is not lost yet. I still believe the brand name is superior and the consumer trend. Here are some analyst take. If you have believed them blindly, the result is guaranteed to be disastrous. Have your independent view and judgment. I think many time, stock with cheap valuation should be safer than expensive one. Although, in short term, I expect more fluctuation.
SYNEAR, cimb maintain TRADING SELL with target price $1.14($1.75)
SYNEAR, db maintain BUY with target price $2.19
SYNEAR, ml maintain SELL
SYNEAR, uob maintain BUY with target price $1.74($2.45)
Assessment of full year result:
Revenue +18.9% (4th Q only +1.3%)
4th Q profit actually decreases
Full year EPS RMB 35.5cts -4.3%
Full year cashflow increased strongly from 289,850 to 514,373
Little bank borrowing
Dividend RMB0.0727
The fourth quarter result is why the bearishness. Because the growth trend has some what being broken.
The increase of distribution point and higher selling price was offset by raw material cost, higher selling & distribution cost. Main reasons for higher cost are intensified competition and severe winter which affect the business.
Future expansion plan intact – Building more factories, warehouse to increase production capacity. Future earning depends on the raw material cost to come down, launch of new product, increase of selling price and increase of production capacity. Things should clear up at 3Q. Assume 10% earning growth next year at RMB 39cts. At current price of 0.70, PE is 8.9 only. HOLD. Buy on weakness.
Monday, 25 February 2008
China lady shoe maker – Hongguo FY07 result
Total revenue +24.36%
Net Profit +21.56%
Operating cashflow before movement in working capital +21%
Earning per share (0.28 RMB) + 21.7%
Sales of C.Banner increased 21.38%
Sales of E.Blan increase 38.5%
Gross margin expanded to 40.57%
Profit before tax rose 18.28% dragged down by 50.17% increase of cost.
The bigger sales increase of E.Blan brand shows that the mid tier market expand more quickly. The black spot of this result is the fast expansion of cost. The group design output is increased to 6000 models per year. This couple with new retail information system and another 200 new outlets in year 2008 would further drive the earning forward. The joint venture company to produce Naturalizer and Via Spiga would also start contributing to earning.
The dividend payment is increased from 0.73 cents to 0.97 cents. The most comforting fact of Hongguo is it has achieved another year of 20% increase of profit. As long as you didn't buy expensive. This is a stock worth to keep. Assume they are able to increase the EPS to 0.336 next year. At the current price of 0.635, it is selling at next year PE of 9.4. BUY!
Net Profit +21.56%
Operating cashflow before movement in working capital +21%
Earning per share (0.28 RMB) + 21.7%
Sales of C.Banner increased 21.38%
Sales of E.Blan increase 38.5%
Gross margin expanded to 40.57%
Profit before tax rose 18.28% dragged down by 50.17% increase of cost.
The bigger sales increase of E.Blan brand shows that the mid tier market expand more quickly. The black spot of this result is the fast expansion of cost. The group design output is increased to 6000 models per year. This couple with new retail information system and another 200 new outlets in year 2008 would further drive the earning forward. The joint venture company to produce Naturalizer and Via Spiga would also start contributing to earning.
The dividend payment is increased from 0.73 cents to 0.97 cents. The most comforting fact of Hongguo is it has achieved another year of 20% increase of profit. As long as you didn't buy expensive. This is a stock worth to keep. Assume they are able to increase the EPS to 0.336 next year. At the current price of 0.635, it is selling at next year PE of 9.4. BUY!
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