I was quite busy these few months, didn't finish the company result analysis. I guess it is still alright, since the economy would only get worse, not getting better. So be it, what have been stuck is already stuck.
The recent news on Sino Env and Celestial just highlight to us again, the corporate governance issue of SGX listed China company. I think investors have doubts on the China company partly because we didn't really see the real business and we didn't really know how they do their business.
Sino Env went down because of the Chairman problem which could potential create a share over hang. Time is bad, if you are over leverage personally, it is a risk. Celestial wise, if I read correctly, is the convertible bond come calling. Actually I never expect them would be in this stage. Since the company is government supported entity, I guess it should run "correctly". But never say never. Figures I don't have. I just hope it can pull through the refinancing.
What has been taught in tex book is correct.
1. When you use debt, you enhance the shareholder return, but you also increase the risk
2. Small cap is more volatile, since there is limited resource available to them
Don't put all your money in small cap only. A certain level of diversification is needed, no matter how good the company is.
Sunday, 29 March 2009
Sunday, 1 March 2009
Hongguo FY08 financial result review
Hongguo just release the FY08 financial result. Let's look at whether the consumer spending is slowing down and what are the challenges ahead.
All amount in RMB ,000
Revenue + 19.6%
Cost of sales +21.9%
Selling and distribution expense +35.6%
Loss in joint venture +595% (6,247)
Profit of the year -3.39%
Cash and equivalent 115,376
FD 24,793
Inventories 343,805 (quite a lot)
Amount repayable in a year 65,801 (cash on hand should be able to service this)
Profit before income tax 126,099 (Cashflow quite flat)
Operating cashflow before working capital 156,575
Net cash from operating activities 33,589 (less than last FY)
Cash after adjust investing and financing 115,376
EPS 26.82 RMB cts (a drop compare to last year 27.76)
The revenue continue to grow, as the group open more store. However, the cost is running ahead of the sales. Gross profit margin drop from 40.6% to 39.4%, reverse the past year trend. The reality bites now, as consumer cut back spending, and more promotion activities is being carried out. If not the JV loss, the group might post slight profit growth. Quarter 4 figure got hit after more tax provision is provided. Cashflow wise, the group is generating enough cash for the debt repayment, this should not be a cause of concern.
As highlighted in the financial statement, China retail sector suffered as a result of financial crisis. The group would continue the outlet expansion to drive growth. No dividend is being declared. This seems to be a common practice now among small cap, since they want to conserve the cash for uncertainties ahead.
The result has broken the previous multi year growth trend. The group is not doing too bad, consider the current economy climate, they only suffered a small reduction in profit. I think the retail segment is still quite resilient. But prepare for another year of negative growth. If the EPS decline by 10% for FY09, it would be 24 RMB cts (5.4 SGD cts). At last done price of 0.16, the stock is selling at PE 2.96 which is really amazing.
However, don't forget, the earning now is uncertain. So, the conventional valuation technique like PE is not really working in this kind of environment. It also shows sign of time, when in bear market, cheap would go cheaper. Keep a close watch on it, whether earning would deteriorate more?
The China stimuli package should drive up the demand in coming year. Let's wait and see.
All amount in RMB ,000
Revenue + 19.6%
Cost of sales +21.9%
Selling and distribution expense +35.6%
Loss in joint venture +595% (6,247)
Profit of the year -3.39%
Cash and equivalent 115,376
FD 24,793
Inventories 343,805 (quite a lot)
Amount repayable in a year 65,801 (cash on hand should be able to service this)
Profit before income tax 126,099 (Cashflow quite flat)
Operating cashflow before working capital 156,575
Net cash from operating activities 33,589 (less than last FY)
Cash after adjust investing and financing 115,376
EPS 26.82 RMB cts (a drop compare to last year 27.76)
The revenue continue to grow, as the group open more store. However, the cost is running ahead of the sales. Gross profit margin drop from 40.6% to 39.4%, reverse the past year trend. The reality bites now, as consumer cut back spending, and more promotion activities is being carried out. If not the JV loss, the group might post slight profit growth. Quarter 4 figure got hit after more tax provision is provided. Cashflow wise, the group is generating enough cash for the debt repayment, this should not be a cause of concern.
As highlighted in the financial statement, China retail sector suffered as a result of financial crisis. The group would continue the outlet expansion to drive growth. No dividend is being declared. This seems to be a common practice now among small cap, since they want to conserve the cash for uncertainties ahead.
The result has broken the previous multi year growth trend. The group is not doing too bad, consider the current economy climate, they only suffered a small reduction in profit. I think the retail segment is still quite resilient. But prepare for another year of negative growth. If the EPS decline by 10% for FY09, it would be 24 RMB cts (5.4 SGD cts). At last done price of 0.16, the stock is selling at PE 2.96 which is really amazing.
However, don't forget, the earning now is uncertain. So, the conventional valuation technique like PE is not really working in this kind of environment. It also shows sign of time, when in bear market, cheap would go cheaper. Keep a close watch on it, whether earning would deteriorate more?
The China stimuli package should drive up the demand in coming year. Let's wait and see.
Friday, 20 February 2009
Fish & Co Express and Starbucks selling instant coffee
In the tough time likes this, when consumer scale back the spending, business has to adapt and change. The traditional food and beverage sector is also affected, because people refrain from eating outside often.
Fish & Co Express was launched for the company to go into fast food business. This is a different business segment where most dominated by establish by fast food brand like Mac and KFC. Fish & Co guess its brand and taste would make it an attractive proposition for consumer to try its burger. Therefore, the Fish & Co Express was established at Downtown East. It is expected to draw the young crowd who fancy fast food and might not frequent the restaurant.
If Fish & Co can maintain the quality of the offering, this can be another way of bringing in more revenue. Time would tell whether this venture would succeed. I think the critical success factor of any business is whether do consumer get value for money.
On global front, we know Starbucks is running into trouble. Many outlets were closed in the rationalisation exercise. Those losing money or under performing outlets are closed and they urgently looking ways to boost the business. People used to believe that Starbucks is an affordable daily luxury that people cannot live without. The recession proves this belief is wrong.
The new product Starbucks wants to launch now is actually instant coffee. If you look at the market of instant coffee, it is growing. More people having the cup of instant coffee whether at home or office. Maybe because of the slowing business, they are trying to target this new market segment. Won't it be great if you can enjoy a cup of affordable premium coffee at home? Brand consultant questioned this move, whether it would erode the brand. It is a double edged sword, you could be gaining new customer but losing existing customer who sit in the cafe.
Business change everyday and a good management is out to act prudently to keep the company afloat and try to grow the profit. I am still an equity person and believe in stock investing.
Fish & Co Express was launched for the company to go into fast food business. This is a different business segment where most dominated by establish by fast food brand like Mac and KFC. Fish & Co guess its brand and taste would make it an attractive proposition for consumer to try its burger. Therefore, the Fish & Co Express was established at Downtown East. It is expected to draw the young crowd who fancy fast food and might not frequent the restaurant.
If Fish & Co can maintain the quality of the offering, this can be another way of bringing in more revenue. Time would tell whether this venture would succeed. I think the critical success factor of any business is whether do consumer get value for money.
On global front, we know Starbucks is running into trouble. Many outlets were closed in the rationalisation exercise. Those losing money or under performing outlets are closed and they urgently looking ways to boost the business. People used to believe that Starbucks is an affordable daily luxury that people cannot live without. The recession proves this belief is wrong.
The new product Starbucks wants to launch now is actually instant coffee. If you look at the market of instant coffee, it is growing. More people having the cup of instant coffee whether at home or office. Maybe because of the slowing business, they are trying to target this new market segment. Won't it be great if you can enjoy a cup of affordable premium coffee at home? Brand consultant questioned this move, whether it would erode the brand. It is a double edged sword, you could be gaining new customer but losing existing customer who sit in the cafe.
Business change everyday and a good management is out to act prudently to keep the company afloat and try to grow the profit. I am still an equity person and believe in stock investing.
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.
Sunday, 1 February 2009
Ox year investing
While we were busy celebrating the Ox year, the news was busy reporting retrenchment news. It looks like the economic and business is going to get tougher in coming months. I expect the subsequent 6 months, we would have more pain. Consequently, stock market might have room to fall further. Somebody say he see no light at the end of tunnel yet. So, this is not the time for bargain hunting.
During the holiday, I also took time to re-read the book The Warren Buffett Way. I think every time we read a book, no matter how many times we have read, we stand to gain something. It kind of remind me of the fundamental principle I am trying to practise till now. People are fearful now, shouldn't we be a little bit greedy? Of course, this is not ordinary down time, we are in a serious crunch time. But once the strong company get over this, it would perform you in recovery time.
So, now is time, to read your books and further affirm your investment principle and strategy. Zoom down on your watch list, get it ready and finalise your strategy. When to strike and how to strike?
During the holiday, I also took time to re-read the book The Warren Buffett Way. I think every time we read a book, no matter how many times we have read, we stand to gain something. It kind of remind me of the fundamental principle I am trying to practise till now. People are fearful now, shouldn't we be a little bit greedy? Of course, this is not ordinary down time, we are in a serious crunch time. But once the strong company get over this, it would perform you in recovery time.
So, now is time, to read your books and further affirm your investment principle and strategy. Zoom down on your watch list, get it ready and finalise your strategy. When to strike and how to strike?
Wednesday, 21 January 2009
MIDAS in focus again
The market took a turn quickly after RBS announced the big loss. Like I say before, market might have more bad news awaiting us. The reason being that we are still in the process of deleveraging. The untangling of all the complex leverage would take sometime to clear. Loss get snowballed because of lack of credit, sellers forced to sell at fire sales price.
Today, Philips release a report recommending a buy on MIDAS. If I remember correctly, recently other broker also have the same recommendation. The past issue of The Edge also feature the company again.
Since I took notice of the company and concluded it is a worthy investment, the fundamental seems to keep getting better. Only the macro environment keep getting worse. The stock is up for prime time in coming 5 years. Although in stock market, people seems to have short term view only on recent earning.
Macro environment getting better as China keep the infrastructure investment. The company position is improving, but increase production and do more. Bear in mind the company is one of the suppliers to major european train vendor. Have a close watch on it.
Today, Philips release a report recommending a buy on MIDAS. If I remember correctly, recently other broker also have the same recommendation. The past issue of The Edge also feature the company again.
Since I took notice of the company and concluded it is a worthy investment, the fundamental seems to keep getting better. Only the macro environment keep getting worse. The stock is up for prime time in coming 5 years. Although in stock market, people seems to have short term view only on recent earning.
Macro environment getting better as China keep the infrastructure investment. The company position is improving, but increase production and do more. Bear in mind the company is one of the suppliers to major european train vendor. Have a close watch on it.
Sunday, 11 January 2009
2009 stock market outlook
Before I start writing this post, I was reading some articles and comments on the year ahead. Usually, at the beginning of each year, investor would do some reflection and try to position the portfolio for the coming year.
The consensus now seems to be the earliest recovery would be on second half of 2009.
Would it recover by 2009?
This is a really big question. Just like we don't know the danger ahead until we encountered one. Similarly, we are not so sure whether the recovery would happen this year. However, looking at the economic numbers and analysts comment. The sentiment or real picture is actually quite bad. One fund manager mentioned he mentioned seen a bad cycle like this.
I guess we can take cue from this. The earliest time the economy would start to recover seems to be 3Q onwards. However, I am not so optimistic. Just like they mentioned, the problem is quite serious. It would take sometime for the de-leveraging to flow through the economy. This year most likely would be a lost year again. The real recovery would most likely happen in 2010 instead. Year 2009 should be a year of consolidation.
Volatility ahead
Should investor stay sidelined? It depends on your strategy. Many believe we could still have bear rally. Just look at what we had for past few weeks. Few piece of good news could cheer the market up and market picked up. Soon it run out of steam and consolidate. One who is able to constantly monitoring, could use this pattern to have meaningful trading. Since the stock price is "low enough", if you get caught, can still wait for longer term, provided your trading base on fundamentally strong company.
Next checkpoint
Company result would be out Feb or so. Maybe by that time, we shall know the degree of problem and we can estimate base on that. Surprises abound, long term investor better keep the eyes open. I would prefer to take another closer look at Q3 to see whether economy is showing sign of recovering and make my decision. Meanwhile, the extreme swing in the next 6 months, might be worthwhile to pick up some real bargain. Because when you are certain recovery is on the way, the price would have already come out of bottom. Averaging is a better investment strategy at this time.
The consensus now seems to be the earliest recovery would be on second half of 2009.
Would it recover by 2009?
This is a really big question. Just like we don't know the danger ahead until we encountered one. Similarly, we are not so sure whether the recovery would happen this year. However, looking at the economic numbers and analysts comment. The sentiment or real picture is actually quite bad. One fund manager mentioned he mentioned seen a bad cycle like this.
I guess we can take cue from this. The earliest time the economy would start to recover seems to be 3Q onwards. However, I am not so optimistic. Just like they mentioned, the problem is quite serious. It would take sometime for the de-leveraging to flow through the economy. This year most likely would be a lost year again. The real recovery would most likely happen in 2010 instead. Year 2009 should be a year of consolidation.
Volatility ahead
Should investor stay sidelined? It depends on your strategy. Many believe we could still have bear rally. Just look at what we had for past few weeks. Few piece of good news could cheer the market up and market picked up. Soon it run out of steam and consolidate. One who is able to constantly monitoring, could use this pattern to have meaningful trading. Since the stock price is "low enough", if you get caught, can still wait for longer term, provided your trading base on fundamentally strong company.
Next checkpoint
Company result would be out Feb or so. Maybe by that time, we shall know the degree of problem and we can estimate base on that. Surprises abound, long term investor better keep the eyes open. I would prefer to take another closer look at Q3 to see whether economy is showing sign of recovering and make my decision. Meanwhile, the extreme swing in the next 6 months, might be worthwhile to pick up some real bargain. Because when you are certain recovery is on the way, the price would have already come out of bottom. Averaging is a better investment strategy at this time.
Sunday, 4 January 2009
2008 stock market in review
Year 2008 is a remarkable year for people around the world. We experienced many significant events – Beijing Olympics, US president election, Poison milk powder, Financial melt down etc. To stock investor, it was really a bad year. Can you imagine at one point STI was close to 4000 points? One year of brutal sold down erased many years of gain.
What happened?
The storm started way back in 2007 with US subprime problem. Before that, who on earth outside US knows what does subprime means? Subprime itself is only a trigger point to bigger issue awaiting the world. The US is over spending and came to a tipping point where the unwind has to be done. On hindsight, we should have sold all our holdings and keep cash, but again who knows?
Subprime is only an element in the complex web of problem. The key problem is over leveraging. US keep issuing bond, China keep buying.This keep US consumer spending, and China factories running. Bubbles all over the place – commodity bubble, hedge fund bubble etc. Many financial instituion bursted and credit is hard to get. World is now in recession.
We should treat this as lesson and not to let it happen again.
The situation now
The worst is not over yet. Majority of the economist forecast further contraction. From what I have read so far, nobody seems to have idea when we would be out of wood. 2009, most propably would remain anonymous while the economy is trying to pick itself up. Expect more job cut and bad headline every now and then. The problem is in this kind of environment, people would refrain from spending.
Many people are actually still doing ok. But, because of the headlines, they would cut back on their spending too to prepare for the “worst time”. This would accelerate the recession.
My portfolio
On hindsight, I should have cut main bulk of my portfolio to preserve the capital. However, as a long term investor, my mindset is really focusing on “long term”. There would be a need for me to re-think this idea and see whether this still applicable in Asia context. Anyway, the damage is done, we can only wait for the next upturn patiently.
Purchase of the year
Due to work commitment and the bad new headline everyday, I really didn't pay attention to the stock market. I did my small purchase when I thought it hit some sort of bottom. How wrong I am! There waves and waves of further sell down. Anyway, they are for long term – FJ Benjamin and China New Town.
FJ Benjamin is an attractive option to participate in the Singapore tourism boom. Come 2010, there are new selling points for Singapore. However, before that materialise, the current economy situation has already hit the retail sector. Never mind, when the economy recover, hopefully in 2010, the stock would be in time to perform. The wild card would be house brand – RAOUL.
China New Town had a strong debut on SGX. After that, it is all the way down, due to many incidents. Having fell from the IPO price of 0.80 to current level, those who still hold the IPO stock is having a broken heart. The promise of the company is always the land it holds and its connection. Personally, I think it would succeed given a few years and not being hammered by the credit crunch.Things to watch out for the stock are borrowing and china property market news.
Great Singapore Sale brought forward
Even though the Great Singapore Sale in June is still long way to go, but I think we already have it now. Notice that in past few months, we have all sort of sales. Retailers are trying to boost the dwindling sales figure.
As Singapore economy is very open, we are the first one to suffer, and maybe the first to rebound. Both internal and external demand is weak, it affect the consumer confidence. Another sales we are having now is the Great Stock Sales, but no taker yet.
US to save more
No doubt, US is in recession now, and they are not expected to come out quickly. The deleveraging process is painful and there is an urgent need to save jobs. The incoming president has already started work on the financial stimuli package to boost the economy. Since the trouble starts from US, it has to end at US too. US still consume a hell lot of world's goods.
However, the recovery would not be so swift. One of the popular present last christmas was piggy bank. US is start saving now! Even new jobs are created, it would take a while for people to start spending again. They would consciously save some money before they start spending.
The silver lining
US might take a whole to recover and start spending again. We hope China, in some way, is helping everyone out. They have the massive stimuli package to boost rural income and demand. The massive infrastructure building program should help to create more job and boost China economy. Hopefully this would create demand for more external goods.
The key thing now is how to create demand?
What happened?
The storm started way back in 2007 with US subprime problem. Before that, who on earth outside US knows what does subprime means? Subprime itself is only a trigger point to bigger issue awaiting the world. The US is over spending and came to a tipping point where the unwind has to be done. On hindsight, we should have sold all our holdings and keep cash, but again who knows?
Subprime is only an element in the complex web of problem. The key problem is over leveraging. US keep issuing bond, China keep buying.This keep US consumer spending, and China factories running. Bubbles all over the place – commodity bubble, hedge fund bubble etc. Many financial instituion bursted and credit is hard to get. World is now in recession.
We should treat this as lesson and not to let it happen again.
The situation now
The worst is not over yet. Majority of the economist forecast further contraction. From what I have read so far, nobody seems to have idea when we would be out of wood. 2009, most propably would remain anonymous while the economy is trying to pick itself up. Expect more job cut and bad headline every now and then. The problem is in this kind of environment, people would refrain from spending.
Many people are actually still doing ok. But, because of the headlines, they would cut back on their spending too to prepare for the “worst time”. This would accelerate the recession.
My portfolio
On hindsight, I should have cut main bulk of my portfolio to preserve the capital. However, as a long term investor, my mindset is really focusing on “long term”. There would be a need for me to re-think this idea and see whether this still applicable in Asia context. Anyway, the damage is done, we can only wait for the next upturn patiently.
Purchase of the year
Due to work commitment and the bad new headline everyday, I really didn't pay attention to the stock market. I did my small purchase when I thought it hit some sort of bottom. How wrong I am! There waves and waves of further sell down. Anyway, they are for long term – FJ Benjamin and China New Town.
FJ Benjamin is an attractive option to participate in the Singapore tourism boom. Come 2010, there are new selling points for Singapore. However, before that materialise, the current economy situation has already hit the retail sector. Never mind, when the economy recover, hopefully in 2010, the stock would be in time to perform. The wild card would be house brand – RAOUL.
China New Town had a strong debut on SGX. After that, it is all the way down, due to many incidents. Having fell from the IPO price of 0.80 to current level, those who still hold the IPO stock is having a broken heart. The promise of the company is always the land it holds and its connection. Personally, I think it would succeed given a few years and not being hammered by the credit crunch.Things to watch out for the stock are borrowing and china property market news.
Great Singapore Sale brought forward
Even though the Great Singapore Sale in June is still long way to go, but I think we already have it now. Notice that in past few months, we have all sort of sales. Retailers are trying to boost the dwindling sales figure.
As Singapore economy is very open, we are the first one to suffer, and maybe the first to rebound. Both internal and external demand is weak, it affect the consumer confidence. Another sales we are having now is the Great Stock Sales, but no taker yet.
US to save more
No doubt, US is in recession now, and they are not expected to come out quickly. The deleveraging process is painful and there is an urgent need to save jobs. The incoming president has already started work on the financial stimuli package to boost the economy. Since the trouble starts from US, it has to end at US too. US still consume a hell lot of world's goods.
However, the recovery would not be so swift. One of the popular present last christmas was piggy bank. US is start saving now! Even new jobs are created, it would take a while for people to start spending again. They would consciously save some money before they start spending.
The silver lining
US might take a whole to recover and start spending again. We hope China, in some way, is helping everyone out. They have the massive stimuli package to boost rural income and demand. The massive infrastructure building program should help to create more job and boost China economy. Hopefully this would create demand for more external goods.
The key thing now is how to create demand?
Monday, 29 December 2008
China Hongxing store in JB Bukit Indah
I have been to AEON Bukit Indah JB yesterday. To my big surprise, I saw the following store:
Hongxing Erke store in JB! This is truly amazing. I wonder some malaysian business man has actually set up the store there?
Hongxing Erke store in JB! This is truly amazing. I wonder some malaysian business man has actually set up the store there?
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