Thursday, 8 August 2019

Thoughts on Tat Seng Packaging 2Q Results- A decent 2nd quarter

Back from holiday in Korea and the earnings season arrives for my portfolio once again.

Tat Seng Packaging released its results on 8 August 2019

Personally i would say i am pretty pleased with the results as i had anticipated much worse results.
Interim dividend of 1 cent is maintained and from the cash flow statements, they can well afford the 1 cent.

My Key takeaways

1) Margins Improvement
- Gross profit margins and net profit margins improved quarter on quarter despite falling corrugated prices.

1Q 2019
2Q 2019
Gross Profit Margin
Net Profit Before Tax Margin
Net Profit Margin

2) Cash Flow Improvement
- Compared to previous year where its operating cash flow is negative, the cash flow this quarter is surprisingly high at 14.2 million ( roughly 9 sgd cents)
- Compared to previous quarter, 2Q's cash flow was higher by 1.5 million before change in working capital and roughly 5.6 million if net cash in operating activities is calculated.
- The impressive ability to pare down its inventory as well as trade receivables led to the above.

3) New production line at Nantong Tat Seng did not lead to Tat Seng being unprofitable
- One worry i had was that the depreciation might be too high and erode profitability especially when margins are very lean. However from the cash flow statements, it seems like the incremental depreciation could be around 500k per quarter or 2 million per year.
-Despite the increase in depreciation cost, the company is able to be more profitable than in the 1st quarter.

4) Sales Volumes increased
-Despite falling corrugated prices and tougher market conditions, Tat Seng recorded a 2.6% growth in sales volume for its China operations in the 2nd quarter.

5) Broad Corrugated Trend still intact but quarter on quarter trend differs

Quarter on Quarter, corrugated prices fell but Tat Seng ended up earning more, breaking the 'trend' that a lower corrugated price leads to lower profit each quarter. But when compared to previous year where corrugated prices are clearly higher by about 26%, the much lower profits in this quarter are reflected by the way lower corrugated prices.

Final Thoughts

-With the 2nd half of the year usually being the peak period of the company, i still remain confident that they have a shot at achieving 10 cents earnings per share this year. If anything, last year's 1H profits were a high watermark to beat and given the economic conditions it was very unlikely for them to better it this year anyway.

- A key concern i would probably have would be that RMB depreciation would once again eat into the earnings and book value of the company. In the 2nd quarter, SGD to RMB increased from
1 SGD = 4.96 RMB at end of Q1 to 1 SGD = 5.08 RMB at end of Q2. A rough 2.4% increase was enough to eat up close to all its profits. With talks about China using RMB depreciation as a measure, the macroeconomics side of things definitely does not look as rosy.

-Having said that, i remain pleased at how the company controls the decrease and increase in % of general and administrative expenses compared to its decrease and increase in % of revenue when compared to previous year's quarter.

Currently trading at a potential 6.18% yield, 0.6 price to book and possibly 6.2 PE with reducing debt levels. It looks tasty to me actually.

As usual, ending the post with a k-pop picture

Friday, 12 July 2019

Powermatic Data (SGX:BCY) - Stellar 2H and Key Observations

Powermatic Data released its annual report on 9 July 2019, its full year results was released some time ago back in May 2019.

A very stellar 2nd half of the year was the main contributor to its 46% jump in Profit before tax. A final dividend totaling 8 cents was declared. At its closing price of $1.80 on 12 July 2019, this translates to a dividend yield of 4.44% and a PE of 9.

The following are my key observations from the results and annual report.

1) Gross Profit Margins fall well offset-ted by revenue growth.

Even though gross profit margins lowered, the company achieved $12.2 million revenue in the 2nd half of the year, roughly 48% growth compared to 2H 2018. Furthermore, Powermatic Data has shown growth across each half of the year, which is definitely pleasing to the eyes.

2) Inventory growth in tandem with revenue growth.

-As inventory is only sold after the reporting period, the right way of looking at the table will be comparing inventory of prior half year to the next half year's revenue growth.
As such, a 3.43% growth in inventory in 2H 2018 lead to a 5.42% growth in revenue in 1H 2019, similarly a 38.47% growth in inventory lead to a 40.6% growth in revenue.
While i am not gonna plug any numbers from the sky, but a 39.8% increase in inventory this year will result in what kind of revenue growth in the upcoming half will be interesting point to take note of.

-Do note that there will always be a risk that higher inventory values might lead to higher write-offs.

-The counter argument will be that Powermatic Data has kept is inventory at a range of 17-19% of its next half's revenue.

3) Growth in fixed deposit and interest- earning balance

-Both fixed deposit and interest earning balances have seen a close to 50% increase this year.

-This would contribute to its bottom-line under 'Interest Income' which has already seen a 75% increase from 2018 to 2019.

4) Dividend Income would likely be lower this upcoming year.

-Powermatic has sold some shares of the Thai companies it has held for quite some time. While it is not disclosed that which company it has dumped, its not really a top secret that it has held shares in Synnex (Thailand) Public Company Limited  as well as Thai British Security Printing.

-Thai British Security Printing in particular has performed badly in its recent financial year and has omitted payment of dividend. Therefore it is very likely dividend income will fall.

5) Property Valuations improved

Its freehold property, a key point of attraction for many value investors, stood at $17.1 million on its balance sheet while its fair value was $31.5 million. The fair value improved from $30.2 million to $31.5 million on the back of higher transaction prices around the area.

-The company has 78 cents of cash after deducting all its liabilities coupled with an investment property that is worth 90 cents on its balance sheet as well as Thailand equity worth 18 cents, the company is trading virtually business free at current price of $1.80.

-Perhaps if the company continues to record a 30-40% revenue growth in this coming financial results, this company might attract investors to start believing that the current valuations are way too low.

-However, even if it does not record such growth, a investor in for the long run should be quite pleased that they are getting good value even at such prices.

The upcoming agm should be quite an interesting one in my view as the company did remarkably well in the 2nd half of the year coupled with a new factory in Malaysia, it would be interesting to hear from the management.

This would be my last / 2nd last post for the month as i would be taking a break and would likely return in August.

Signing off with a k-pop picture as usual

Saturday, 29 June 2019

A midnight write-up on ST Group Food Industries Holdings Limited

This will be a midnight write-up on ST Group Food Industries Holdings. I apologize for any mistakes in the following post. Its one of my first time or few times writing an IPO as well. 

Issue Price: $0.26 per share
Issue method: Only private placement
Total Issued Shares after placement: 246 million shares
Net Profit for 1H2019: 1.912 million (In Aussie dollars)
Implied PE should results stay the same would be 17.3  (without counting in IPO Cost)
No dividend policy is stated.

What I like from the company

1) Shareholding after the IPO

Nobody seems to be cashing out from pre to post ipo, which is a good indicator. The 2 cornerstone investors are the master franchiser of Nene Chicken as well as the IPPUDO brand.

2) Tri-core business segments. IDarts not being a core is not included.

The company has 3 segments, food and beverage retail, supply chain and franchise.

F&B Retail
Supply Chain
2016 Segment Margin
2017 Segment Margin
2018 Segment Margin


With the increase in stores and increase in margins over the years, it is expected that the company should do well in both F&B segment and Franchise revenue.
As the company obtains royalty based on a % of the gross sale of its sub-franchised and sub-licensed outlets, the company is able to participate in the growth of these brands as well (at the same time putting themselves at a slight risk of the brands not doing well)
At the same time by being able to provide the food via its central kitchen, the company is able to ensure its food quality via its supply chain segment and yet at the same time earn a profit. This is pretty good integration to me.

What I dislike from the company

1) Papparich
-One would wonder why is Papparich not a cornerstone investor and instead we have Nene chicken and IPPUDO master franchisers as one when IPPUDO only has 2 outlets so far.
-On a closer look, the company only owns 50% of Papparich. As such it would record roughly half of its profits Papparich makes under Non Controlling Interest(NCI).

I think it's good that over the years, the profit to the shareholders have increased and the company has been moving away from reliance on Papparich as the sole brand . 
However, it also shows that Papparich's profits have stagnated from 2016 to 2018. Although in HY2019, NCI came in at A$856 000, it remains to be seen what's the strategy with Papparich from here on.
I won't say this is a terrible point to dislike about the company its probably picking bones out of an egg to be honest.

2) The need to raise fund is not justified
The company will be receiving net proceeds of S$6.2 million after the placement. The company earned A$2.7mil (not including NCI share).
Judging from its fabulous results in HY 2019 whereby it earned A$2.768 million in half a year whereas in the whole of 2018 it earned A$3.763 million, it's fair to say the profits this year and last year should be very close to the net proceeds. Hence it makes no sense for me why they would consider such a placement.
Though under trade payables, the company has roughly A$3.1 million amount due to shareholders and related parties. It remains to be seen how long this will remain on the balance sheet.

I feel that this is a pretty decent company which has very good integrated business model featuring franchise, retail outlets as well as supply chain. Though I would still be puzzled by why would they want to conduct such a private placement and be listed on the sgx.

Financial results: 5/5
Balance sheet: 4/5
Self-feel: 0/5
Total: 9/15

Like any other companies doing a listing on the market, this company will still likely record a lower profit as it has to account for listing expenses. Being the first restaurant company to list but not have any operations in Singapore, it will be unfair to use listed Singapore peers to compare to this company.

If I am honest, this company looks damn good, just too good to be true for me to buy into it.

As usual attaching a k-pop photo at the end of the post.

Saturday, 8 June 2019

Uni-Asia 1Q results post-briefing review- Look forward to the dividend after 2Q 2019

Uni- Asia posted its 1Q results on 15 May 2019 and held its briefing on 30 May.

Will jot down the key takeaways as well as my thoughts about the results.

Shipping Sector

-As per weakening sentiments in the dry bulk rates, the revenue came in lower and 2 of the spot rate ships were originally part of a pool of ships that were under the management of others for charters. That arrangement did not yielded results that were expected by the management and were changed to a model index linked charter to the BHSI. As most of the ships were under long term charter, the results remained decent.

-Looking at the dry bulk rates up till end of May,  i think the charter income should come in at worst case of -10% to 1Q 2019 results. That should still mean that the segment is profitable. Though the key factor affecting revenue would be how much improvement the change in ship arrangements would bring.

Maritime Asset Management Sector

-Following repeated fair valuation adjustment downwards in 2018, there were no adjustments in 1Q 2019 which is a plesant sight. Furthermore, the total investment on the books has been reduced to 5 million USD from 5.8 million USD at end of 2018. This is due to a return of investment of 1 million and recording roughly 200 000 as seen in investment returns. All in all, the risk exposure has reduced which is good to hear.

-Though a key concern would be still how expenses are above the charter income even though it has come down a lot.

-This part of the business is hard to estimate but i do hope that they continue similar results throughout the year.

Property Investments (Ex Japan)

-The 2nd project (CSW 650 also know as China Shipbuilding Tower), an office building in Hong Kong still has 2 floors of 'profit' not recorded yet. They have been sold and would likely be recorded in the 2H 2019. The estimates of the amount to be obtained is probably 5-6 million before fees involved in the partnership.

The estimates of proceed do not fall short of my own layman estimates as well.
Given a ballpark conservative estimate of 4 million in the 2H, this would equate to roughly 6.8 cents sgd.

-The 3rd project (K83), another office building in Hong Kong is slated to complete by 2019. According to management, it seems likely that some gains would be recorded this year. Having made a convenient trip down to proof read my eyes that the building does exist and match to the photos seen in the presentation slides, i would say that it is more than likely this building would be completed this year.

Both projects would likely be a key driver in the dividend for 2H 2019 should there be no recognition in the 2nd quarter.

Property Investment in Japan

-Results mainly boosted by a one-off sale in Feb 2019 of Hotel Vista Nagoya Nishiki, which is not a surprise as it has been mentioned in the annual report of Uni- Asia as well in previous posts following takeaways of the AGM. Following which there are no hotels that are owned by the group, which means that such one-offs will not happen.

-Notwithstanding that, 3 Alero projects were sold in 1Q 2019 and had contributed to the bottom-line. Though 2Q would likely see only 1 project being sold and should have a lower contribution from this segment.

Vista Hotel Management

-Having gone thru the new lease accounting, it is estimated that roughly 2.4 million USD would be added to the expense this year due to the new accounting rules.

-The figure would likely come down only from 2021 onwards, which means 2019 and 2020 would likely stay high due to more new opening of hotels in 2020 as well.

-Profitability of the hotels business would be a loss of 100k-300k if the accounting rules been not counted.

- A pleasant sight would be an improve in occupancy rates despite a higher hotels operated and it has been guided previously that 1Q is usually the worst quarter for its hotel business.

-With the golden week in Japan, 2Q would usually be stronger and it remains to be seen how the results come in.

Personally i would still estimate the hotel management side to record a loss this year as a result of the leases expense.


-2H 2019 should be better than 1H 2019, on the pure basis that the recognition of profits from 2nd and 3rd project in Hong Kong

-Cyclical nature of shipping sector affecting bulk rates is a factor not in the control of the company.

-Hotel Management occupancy rates improving.

-I would look forward to the mid year dividend. If asked to estimate i guess it would be 2 cents sgd hopefully. As they target to pay a dividend equivalent to the minimum of 35% of profit for FY 2019.

As usual, at the end of my post there would be K-Pop pictures.

TMI: My K-Pop addiction has risen multiple fold this year, but its probably the most crucial thing that is driving me in continuing investing to fund my hobby(which is spending on concerts and K-Pop related).

Don't be surprised if the pictures are reused, for pictures are limited just like how one's capital/war chest is.

Friday, 31 May 2019

Portfolio Actions/Review April and May 2019

As May comes to an end, things look to be a carbon copy of what is happening last year, where STI
peaked in May and fell in the subsequent months.

I think the next few months will once again be tough.

Nevertheless, i will have to continue investing as i still have to continue to work towards the new unrealistic aims set.

Year to Date STI returns: 3.59%
Year to Date HSI returns: 4.08%
Year to Date Portfolio returns: 25.75%
Cash : Portfolio ratio is Roughly 50-50

Actions Done in April and May

1) Added AAG Energy(Hkex: 2686) to the portfolio
-Coal-bed methane extractor in China with a relatively small portfolio of 2 concessions.
-IPO price of $3, however quickly went southwards in the following 3 years
-Partial takeover of 50.5% of shares in 2018 by Xinjiang Xintai Natural Gas Co Ltd (SHA: 603393) at the price of $1.70 Hkd, current price is at least 10% below that takeover price
-Industry seems to be suffering in margins but AAG Energy is one of the companies who has decent margins and is profitable even if the subsidies and vat refunds are not included
-China a net importer of Natural Gas, the demand for natural gas would be present. Furthermore a depreciation of currency would likely result in a more expensive import rate
-Results in 2018 plenty of one-offs in ceasing of credit loan facilities as well as relocation of staff
-Currently debtless as of 31 December 2018, net cash 15% of market cap
-Estimates roughly 10% increase in productions, should bring in higher income via subsidies and vat refunds.
-Key risk: 2020 5 year plans might not be accommodating, company risk involved with extraction

2) Increased holdings in Uni-Asia Group (Sgx: CHJ)
-Will come out with a post hopefully in the next week about the counter after attending the Q1 results briefing.

3) Sold Dongyue Group (Hkex: 189)

-One of my 2 biggest losers in 2018, the other being PC Partners, can be found in an earlier post
-Spectacular rally from start of year to April prompted a relook at the counter's valuations
-Turns out that there has been an analyst report with a buy rating of 14 dollars
-However the assumptions used such as earnings per share predictions are unlikely to happen as majority of peers operating in Dongyue's industries had 50% fall in earnings in the 1st quarter. On the other hand, Dongyue does not report quarterly earnings.
-At $4, its below book value and the PE ratio if earnings are to be halved would be roughly 8, which is reasonable. But at $7 the PE would be 14.
- My earnings predictions has been fairly accurate previously in this counter, trusting my own instincts and research that results would likely flunk, the decision to sell came about.
-As a result cash: portfolio ratio becomes equal.

3 Stocks on my watch-list that i might add but are not in my portfolio as of 31 May 2019 (will come out on a post if i have time)

*Disclaimer, some ideas might have been inspired by others and are definitely not 100% my ideas.

1) LHT Holdings (Sgx: BEI)
2) Starland Holdings (Sgx: 5UA)
3) China Motor Bus (Hkex: 0026)

As usual, at the end of the post there will be a k-pop picture.

Sunday, 26 May 2019

Hk agm vs sg agm similarities and differences

Was in hk for agm on 20 and 21 may. The main purpose of the trip was to decide whether i should continue allocating funds into it and i have gotten an answer from the agms but thats not the purpose of this post.
Please do note that i only have went for 2 so it could be different for other agms.

-Age group attending mostly elderly

-Showing of identification and signing an acknowledgement of number of shares you have

-Management answering questions

-Voucher for refreshments/ door gifts etc

-Proxy nomination by CIMB is $32.10 for each agm. Unlike in sg which is free as u just show ur NRIC as the shares are held in your cdp account.

-Can be held in chinese or english. Which means all resolutions etc are read in chinese or english

-Question asking and answering in cantonese.

-Elderly look to be snapping up drinks and tibits in a frenzy more worst than i have ever seen in sg.

-Results are to be posted on the hkex website and not shown at end of the voting

-Pen and paper used in voting of resolution.

Would like to commend the staff at one of the agms i went. I was given a gift slip when i registered but after voting i lost the slip and was unable to present the slip for a gift. So i told the staff in english i might have accidentally submitted it when i submitted the voting slip and the staff gave me the gift as well. Felt quite thankful for it as its my own mistake...

Thanks to the staff, i was able to obtain 2 new era caps as a gift from 1 of the agm. The other agm just gave light refreshments.

Overall any trip will unlikely be 100% perfect but i am fairly satisfied with this trip.

Following the trip and over the weekend, i have decided to set 2 fairly unlikely targets that i would like to hit and the rewards i would award myself should i hit them.

As usual, time for a k-pop related picture.

Wednesday, 15 May 2019

Tat Seng Packaging(Sgx: T12 ) 1Q results thoughts- On track for worst 1H since 2016

Tat Seng Packaging released its 1st Quarter results on 10 May 2019.

It was somewhat a surprise as Tat Seng has never released its 1Q and 3Q results, meaning that investors have to infer from Hanwell previously.

Results came in with net profit coming in at 59% lower. Though I have to admit that i was not really surprised with the poor results. Will explain later in depth why so.

Results Overview

-Net Profit slipped. Doesn't need much elaboration on this

-Non-Controlling Interest recorded a loss, this meant that one of its plants would have likely incurred a loss, which signifies a much more competitive environment and companies might have to shut down operations.

-Gross Margins slipped below 20%, 20% is actually a very interesting quote from a chinese website that writes 'If not for the sake of the staff, one would be better off working instead of running packaging business that is below 20%)

-Volatile Yuan, especially with trade war possibly bringing yuan back to 1 usd = 7 yuan levels, what this means is that the comprehensive income might record loss and instead be book value destructive

-Sales volume increased 2.9% in 1Q 2019, a remarkable feat considering that the shroud in the industry currently

-Operation remains lean, distribution and selling expenses increased less than the increase in % of sales volume. General and administrative expenses also fell more than % fall in revenue.

-Cash flow from operation came in at 4.3 cents per share, largely due to good trade receivable collection.

-According to Chinapaper, the new Nantong plant to bring in 100 million sgd of revenue each year? Nevertheless, from the article, the new plant seems to be well received and aided by the local authorities. It also reiterates the state of the art facilities present with equipments of international standards. 

So why would Tat Seng be on track for the worst 1H since 2016?

-Do note that 1H results do include 1Q results as well. Previous 1Q results would not be accurate as they would be based on estimations from Hanwell which is something i did not choose to include in the data.

From the chart its easy to understand 3 key points

1) 2H will usually be better than 1H due to the traditional peak season effect. That trend however is not applicable in 2018.

2) An increase in corrugated prices brings higher profits. Similarly as corrugated prices start falling, the profit will follow suit.

3) Despite higher corrugated prices in 2018 2H, profits are lower than 2016 2H. Why is this so?
In 2016, 2H corrugated prices were much higher than 1H corrugated prices. In 2018 1H corrugated prices are higher than 2H. Which is why profit fell (also explained in point 1 and 2)

At time of writing its only May, but April corrugated prices are about 9% lower than 1Q 2019 average. The bad market conditions can also be seen in the shutting down of packaging firm in China.

(Translated to English: Thank you for the long term support to the company. Due to bad economy conditions and  a downturn in the markets. The company is in a loss making position and has decided to end operations on 30 April 2019. Orders that are already received will be delivered as soon as possible. This decision is made out of a lack of alternatives and we apologize for any inconvenience caused.)

Based on that and the above materials, i would estimate that the profits would be lower than 5.7 million which is the lowest 1H result from 2016 to 2018. I would say if the company earns a minimum of 3 cent EPS, it would be remarkable performance.


I would say Tat Seng is generally a decent company going under tough industry conditions at the current moment.
The price to book currently is attractive but estimating earnings going forward is going to be tough as as the highest factor would be demand in corrugated products. This in turn drives prices and profit of corrugated packaging companies like Tat Seng.
I will probably need more time to think through if i should even be adding any equity(not just Tat Seng) at the current stage.
Meanwhile i would listen to some k-pop and think through.

Attaching k-pop pictures as usual.