Previewing Dream International FY 2024 Results (Hopefully its good this time)

Folks who have seen the previous post on Previewing 1H 2023 , FY 2023 and 1H 2024 would not be stranger to such a post. Dream International 1126.HK has been on my portfolio for some time.

(Thumbnail Pic) Please wave the wand and bless the Dream

Writing the Conclusion First: 2H 2024 should outperform 2H 2023 in terms of both revenue and profit. 

(This picture describes my feelings exactly when i think about the FY 2024 Results)

After being wrong when i thought that revenue growth is likely in 1H 2024 but revenue turned out to be -8%, it really takes some guts or being bonkers to write such a previewing thought/prediction. 

After all, i do see many mixed indicators that means that making a prediction is difficult.

I have based my prediction based on the following factors

1) Smartkarma Research Report (In a post on 10 Dec, they mentioned they met the management and summarize the majory takeaways)

- Mentioned that there is decent growth momentum for Plush after slow H1 FY 24(-5%). FY24 could be record year for Plush.

- Mentioned that de-growth could be seen due to prolonged destocking cycle in NA and lack of a hit movie lineup resulting in lower action-figure sales

- Not much clarity on margins as usual

- Not much concerns on dividend currently

- Apart from Indonesia Plant (Small Plant that contributes additional 3-4% max revenue) there is no other expansion plans

2) Oriental Land Q3 Results and Looking Ahead

-Weaker than expected Merchandise Sales coupled with weaker expected visitorship

-Surprisingly, inventory did pick up , showing some promise as Toy makes up 48% of Merchandise Revenue

-To put things in retrospective, inventory levels were as follows (in Million of Yen)

Q2 2023: 16724

Q3 2023: 16523

Q4 2023: 12893

Q1 2024:  9381

Q2 2024: 12621

Q3 2024: 16300

- Looking forwards, figures from Yosocal  and other sources suggest that Q4 2024 of Themeparks are stronger than Q4 2023. With Disneysea being the main driver. Figures can range from +10% to +28% depending on various sources.

(Plush Factory in CN hiring due to expansion of production)

Along with the guidance seen in the research report, i think it forms up a credible link / story. 2H 2024 would have to be much higher than 2H 2023 given that 1H 2024 is 

3) Funko Q3 Results

-After 7 Quarters of Reduced Inventory, Q3 2024 finally has seen an increase in inventory to service demand during peak shipping months

-Despite a -2% reduction in revenue, according to the earnings transcript, COGS was reduced as freight cost and duties came down . Fortunately no mentioned of lowering of cost due to production 

-On the issue of tariffs, 1/3 of products are manufactured in China and will continue to work on plans to further diversify away. (Dream's Vietnam and upcoming Indonesia Plant might come to play)

4) Export to US (Toys)

-Based on official custom sources, export of Toys and Sports Requisites to US is up 22.6% in 2H 2024 compared to 2H 2023. This actually represents an increase since 2022 vs 2021.

- In previous semi-annual results, the decrease in exports has also seen a decrease in Dream's US Revenue. Therefore, this seems fairly accurate

- In a much less accurate statistics of toys imported into US from Vietnam, there has been an increase of 26% from Jul 24 - Nov 24 vs Jul 23 - Nov 23. This is less accurate as in some years it could show an increase but Dream's revenue still decreased. It could be things like time lag between shipping etc or just items moving past Vietnam into US but not actually produced there.

5) Spinmaster's Monster Jam Positive Growth

-16.5% Growth Pos Metric in Q3 a positive amidst a high revenue mark in 2H 2023 for Monster Jam.

- However, new products e.g remote controlled car is produced in China and not Vietnam, indicative that full growth might not seep down and benefit Dream as Dream does not do die-cast in China.

(Made in China)

Why i might be very very wrong

1) IIP Production Down

Index of Industrial Production (IIP) of Vietnam for Manufacture of Toys, Games is a rather accurate indicator thus far.

When the IIP is down YOY, revenue of Dream is also down YOY. With the index down 5.96% for 2H 2024 vs 2H 2023, this is one of the biggest stumbling blocks.

Fortunately, this tends to reflect in the Plastic Figures more compared to the Plush.

2) Management Self-Guidance of Plastic Figures Growth Down

-Despite the other factors looking well, this still holds much credibility although we are not sure when the meeting was actually done and as such we still have to keep a watchful eye over a lower revenue from Plastic Figures.

3) Unexpected Weakening of China Themepark Consumption Figures

-The weakening of consumption might linger or play a part although we still have to go back to management guidance as the 'likely indicator'

4) HK Disney Visitorship Down

-Consumption Downgrade. HK Retail Sales down 7.3% in November

-Visitorship likely down 9% in 2H 2024 vs 2H 2023. Considering Revenue from HK in 2H 2023 is high at 180 million, makes up 13% of Plush Revenue.

-Tourism seems strong though, 7.2% growth in November 2024 vs 2023 for overnight stays

5) Funko Guidance still bad

Not unexpected as guidance was already crap at the start of 2025 but its still a lingering factor.

6) Export to Japan 

-Based on official custom sources, export of Toys and Sports Requisites to Japan is lower by 21% in 2H 2024 compared to 2H 2023. 

-This cast a doubt to whether revenue to Japan will actually be up like mentioned in the research report.......

Conclusion

The indicators are all over everywhere......its a meme fest really. The results in March 2025 will be a rollercoaster one as most of the indicators will get refreshed and some of them will either become less useful or much more useful.

The smartkarma report definitely was somewhat helpful although the information on the plastic figures segment got me scratching my head for sure.

Lastly, it is very rare that a company's share price has grown since showing a 17% drop in profit......Dream has shown this and probably indicates that it is still cheap despite a 17% drop in revenue or folks are positive towards its results being good for 2H.

K-POP Pictures Spam Time.

Wild Predictions Time (Something i usually do after putting K-Pop Pictures Spam)

Plastic Figures Revenue Increase: 8% vs 2H 2023

Plush Figures Revenue Increase: 30% vs 2H 2023 (Assuming record breaking revenue for Plush)

Slight reduction in Margin across both segments.

Overall 17.6% Increase in Net Profit in 2H 2024 vs 2023

86.3 cents EPS in 2H 2024. 

Along with 41.2 cents EPS in 1H 2024, a total of 127.5 cents in FY 2024.

Bear Case: Record FY for Plush is not true(0% Growth vs 2H 2023), Plastic Figure Revenue Growth Negative(-8% VS 2H 2023). Margins Shrink as Economies of Scale not achieved

25% Chance of Happening

Normal Case: Plush Growth (8%-10% vs 2H 2023) , Plastic Figure Slight Negative (-3 to -5% vs 2H 2023). Margins perhaps 100 basis point lower / 1% lower.

40% Chance of Happening

Bull Case: Record FY for Plush. Growth (25% to 30% vs 2H 2023), Plastic Figure Slow Growth (3% to 8% vs 2H 2023). Margins 50 basis point lower to 150 basis point higher)

30% Chance of Happening

Wild Crazy Bull Case:  Record FY for Plush. Growth (30% to 40% vs 2H 2023), Plastic Figure recovers(15% to 30%) along with recovery seen in export figures to US and Funko. Margins improve 50 to 300 basis point higher due to economies of scale and improvement in production due to increased use of automation etc.

5% Chance of Happening

For myself, if the results in FY 2024 is the same or higher as FY 2023, it would be good enough.

2024 Year End Review

 

2024: Returns: 48.08% (If 2023 is a miracle run, 2024 would be a demigod run)

Year End Thoughts

Overall the cold hard truth is that a lot of time in 2024 is spent on monitoring the business environments of the positions i have held this year and i did not have to make too much changes (with the exception of rotating Huationg Global out)

The toughest year will be the year ahead and 2025 is probably a year where i have to think about what would be the right stocks to hold / what would be good replacement if stocks in the portfolio are not performing as well.

Other than that, if they do continue to perform well, i don't see any need to rotate them out.

Its safe to say i don't expect my returns in 2025 to be anywhere near 2024. 

Motivation wise.........i think it is the same as previous years (Which is low). In fact in August when my portfolio was at +4.52% returns when it was 27% in May...i had flash backs of 2018 again when i went from +20 to -10. Fortunately things worked out well. I wrote more about it in a previous post here

Portfolio Related

Fortunately, the main bulk of ideas worked out (Dream and Centurion) while the new additions (IGG , Wee Hur ) turned out great. 

Bought Dream at 3.98 and 4.1 in Feb and March. Closed 4.98 at end 2024.

Bought Wee Hur at 0.25 , 0.305, in Sep and 0.42 in Dec. Closed 0.42 at end 2024

Still, some alpha capture plays such as Kwoon Chung Bus and Saint Mig HK backfired. 

Huationg Global largely unimpressed with its announcement that it did not manage to renew the tender for the dormitory resulting in a 20% intraday loss. 

Selling out took a period of time considering the trading volume , the stocks i held (which put me in the top 20 shareholders namelist).

Centurion has been rotated out of the portfolio for a more short term value play which i think it is in Wee Hur.

This was before i saw the D&D video which mentioned the KPI of 4 billion aum from ard 2.1 billion (which increases the likelihood of corporate actions in 2025). 

On a longer time frame, i believe the worker dorm policies will still benefit long lease owners like Centurion.

In End 2024, the larger positions are (>6%)

1) Dream International

- Theme Parks Visitorship in Japan have recovered in Q4 2024 and outperformed compared to Q4 2023. There has also been an increase in inventory for end Q3 2024 which suggest restocking (this was actually not seen in Q3 2023). 

- Toys Export to US is actually up (although a report by an individual research firm who has met the management has wrote that plastic figures segment might be weak or weaker than last year which has put some ??? in my thoughts). 

-Funko Inventory has slightly increased for the first time in many quarters. Revenue guidance for Q4 remains weak though.

-Shanghai Theme Park remains at similar levels compared to last year. Slight worry maybe is HK which has fell. However guidance by the independent research firm points to possibly a 'record' year for plush.

-Spinmaster's Monster Truck Segment remains strong with 16% growth in Q3.

-I still think the new customer's impact is limited and can only be re-assessed again when the full year results are out.

(Potential New Customer?)

(Made in Vietnam)

(Bread and Butter Business Plush)

2) Wee Hur

-FY Results will be key. The divestment will provide the base for a transition to a cash rich balance sheet.

-Things to look out for. 2H PBSA Profit , Worker Dorm 2H Rev and Profit , If construction will turnaround, Dividends, Progress of New Dorm (Any potential delays or early completion)

3) Infinity Development

-Gross Margins continue to improve.

-New Indonesia Plant likely to assist and in-line with Major Customer Yue Yuen's expansion plans

-Monitor Major Customer's Revenue 

With that the 2024 Review has come to an end.

Self Reflections

It seem magical that whenever Lovelyz does a concert, the returns seem to be the highest.

When i saw them in early 2019, it motivated me to want to invest so that i have the chance to see them in future and it has resulted in my highest returns 

This is once again eclipsed only in 2024 which coincidentally i had the chance to catch their 10th anni concert (their first live concert since 2019)

It has been a good year for myself as i was glad and blessed to be able to attend much more K-POP Events. 

(Never expect myself to go to US to attend a K-POP Tour...but it happened)

 (Sending Hearts and Wishing Everyone a Happy New Year)

(December 2024 Results) How i would invest in the singapore stock market if i had 100k of spare money

 

December 2024 Returns: -1.66%

Year to Date Returns: 30.50%

Since Inception (9 Sept 2020) Returns: 127.50%

December is a month where negative returns is seen. Mainly coming from Wee Hur. I have evaluated the divestment news in another post so i would not be mentioning it again. 

The only point that i would point out is i am not selling out the position. I don't rule out adding at around this level either but i will reassess the portfolio again as a whole.

Overall for the year, 30.50% returns is pretty good.  

The overall returns over the years looks like this

CAGR:16.9% (For anyone interested in CAGR)

Definitely, Bulk of the returns has been driven from Centurion, Haw Par , Wee Hur and Moneymax.

A stock that i want to mention would be Centurion. Which has posted their D&D video 2 weeks ago.

In their video, they mentioned their assets under management is around 2.1 billion and the KPI for 2025 is 4 billion. Also mentioned that they deliberately skipped the number 3.

This will likely be done thru recycling of capital and asset-light strategy.

I found this to be quite amazing and amusing. Definitely it seems like a busy year ahead. Whether or not this is done via JVs or 100% ownership in assets.

As always , thanks for following this series in 2024. 

Hoping for a decent 2025 for everyone ahead.

Evaluating the Disposal Announcement by Wee Hur.

 Wee Hur announced that it will be disposing a huge proportion of their stake in the Australia PBSA. The deal values the student properties at A$1.6B which is what was mentioned in the media previously.

No surprises there.

Details of the disposal in brief

-Proceeds of S$320 million or 34.8 cents SGD

-Record a gain of 9 cents SGD

-13% stake retained

-Deal expected to complete sometime in 2025

Is this a good deal based on the current price of 0.475?

Current Price indicates a market cap of 436.64 million

13% of A1.6 billion would be 178.1 million SGD (Student Accomodation)

2H 2024 Profits of Australia PBSA (Estimated around 12M, based on rental revisions and operating profit of $20.6 million in 2023)

117 million of spare cash

95m of receivables

Workers Dormitory (26M Profit in 1H 2024 but only 60% stake so 15.6M)

Bartley Vue Development (TOP 2026)

Since total liabilities is around 320 million as well, this means a clean sweep of the balance sheet to no liablities.

Doing a simple calculation

436.34 million -117 million (cash) - 70 million (discounted receivables) - 12 millions (PBSA Profit) - 178.1 million (Stake in PBSA)

= 59.24 million

This is the current value of the workers dormitory + the Bartley Vue Development which is definitely a big discount.

Assume a low 8% net profit on proceeds of Bartley Vue = 15.76 million. 75% interest = 11.82 million

The 15744 bed dormitory runs till 2026

The 10500 domitory runs till 2029. Expected to be fully operational from 2025

Both have 60% stake.

Estimating around 16m of Profit for each half for the 15744 bed. Till 2026 this brings in around 80M

The 10500 bed will bring in around 106 million until 2029.

Assuming no extension is provided (it was granted in 2023)

The undiscounted value is around 200 million already compared to current valuation of 59 million

Not to forget the australia land, construction,fund management(45 million) , alternative investment (13 million) are free.

Realistically speaking. I think the company should be worth around 0.75 at least.

We would see what the market thinks of this deal. I think the PBSA Profits in 2H might be decent as well (exceed 12 million estimations).

In the long run, whether this deal goes through or not, it at least ascertains the value of the PBSA.

Forgot to add that their 30% owned PBSA Y Suites on Margaret in Sydney is not included in this deal. As of 31 December 2023, it was valued at 90 SGD Million. As such, it is another 27 million to Wee Hur. Roughly 2.9 cents per share worth. This PBSA will only come into operation in 2025. Given the positive revisions seen in 2024, it is likely that it is worth more than this figure already.

Late Night Sudden Short Thoughts on My Portfolio

Boring Post Ahead

Using stockscafe, it has been a convenient way for me to see the different statistics provided.

One of the recent table that i have seen was pretty alarming for me although i do feel that it probably is true

In short these past 3 years, i have not been able to inject capital into the portfolio.

Realistically when i see this stat, the first thought that came to my mind was actually how much this amount actually relates to the portfolio in terms of %.

To give an example in portfolio management, if the amount you can inject is 20k while your portfolio is 200k. you are injecting less then 10%. This means that what is in your portfolio is probably more important than what you do with that 20k.

Of course if you only have 5k and you want to inject 20k then these 20k is more important

I guess most folks would know this. Then the question becomes, instead of thinking what new things to buy with these 20k, would it be better to think about how the 200k should be positioned first?

This only applies for mostly stock picking.....if its index purchases and just reaping market returns and volatility then it does not matter much.

This is where opportunity cost probably steps in. However this topic of opportunity cost might get too complex and boring.

1) It depends on how many stocks you have researched, what are your odds of them performing well, how confident you are

2) Versus the current stocks you hold, their outlook based on your research, how much your research is relevant.

To cite a recent example, Powermatic Data is a stock i have talked about often. But i usually say the same thing that i say in telegram.....is a stock that i would recommend my parents to hold but i would not hold it myself.

The holding period for this company to show potential returns is too long (2026). As such, the opportunity cost is probably too large for someone like myself who sees it as being impt. But for e.g my parents would not bother such things so they can have a longer holding period so its totally ok as the balance sheet is still solid.

Of course there is every chance i pick another stock and it does badly while powermatic starts to show value earlier and it makes me look like a big miss but that's stock investing and such things might happens anyway. 

Secondly i think there is always the talk about what are your returns .

I think everyone has different risk appetite, different ways of viewing investing so as long as 1 is happy with their returns based on their way of doing things then all is good. But if u are not happy with your own returns then perhaps a change of way of doing things is probably required.

For example , you cannot be putting your money in t-bills and thinking you will get 10% a year.

Another example is 33.1% returns made over 3 years can be seen in 2 ways

a) Year 1: 0%, Year 2: 0% , Year 3: 33.1%

b) Year 1: 10%. Year 2: 10%, Year 3: 10%

People can talk until the cows come home whether a or b is better but end of the day it really depends on how much you inject into the stock/portfolio 

Someone who keeps putting in money each year will be better off with (a), someone with a lot in the portfolio already and cannot put as much money in will prefer (b)

Conclusion: Sometimes it is not about whether this company has good cash flow, good balance sheet, good income statement, good prospect that really results in a buy. Opportunity Cost might be a good consideration as well to think about.

But of course if the strategy is just to scatter as many stocks and hope that you pick more good ones than bad ones then opportunity cost might not matter....but still i guess there is a need to have some effort to keep track of the business prospect of the various stocks...at least for me thats how i think of it.

Sharing a photo taken which was part of the concert package in one of the concerts i went this year 😂

(November 2024 Results) How i would invest in the singapore stock market if i had 100k of spare money

 

November 2024 Returns: 3.81%

Year to Date Returns: 32.71%

Since Inception (9 Sept 2020) Returns: 131.35%

November is a month of gains. Mainly from Centurion, Wee Hur , Haw Par and China Sunsine

Centurion: I have mentioned briefly from my facebook post. I think that the rental revision for SG Worker Dorms is likely to have peaked and it is unlikely to see sudden 10% increase in price per bed quarter on quarter or year on year moving forwards. Any increase in demand will likely be from the increase in beds.

For the msia side, there has been some articles with regards to the RTS Link and construction activities which might bring a boom to the Msia Dorms. This is one area worth monitoring.

1 aspect analyst has mentioned would be the 'potential value unlocking' which was mentioned in the results presentation slides. It remains interesting and to be seen which unlocking is done if any.

The share price briefly tanked after the 3Q Business Update but then rised again to a higher level afterwards.

Haw Par: I think this is in-line with the movement of bank stocks so there is nothing much to talk about. A beneficiary of 'Higher for Longer' that is for sure.

China Sunsine: Results Stable. At 6 PE, this is rather acceptable. We are not in a peak chemicals price so it is worth to just hold on, wait for the company to expand productions and be ready again for the upswing.

Wee Hur: The australia univeristy cap is not implemented. In most reports i read, it seems like international students are not a large driver of the rent increases ....therefore i have never really regarded it as something good or bad.

I think rates going up are good but if it is unsustainable, then it results in lower demand or larger unpleasure sentiments which will affect policies moving forwards. 

Fortuntately, from Centurion's slides, it mentions that 'occupancies and rental revisions expected to remain at healthy levels'

1 of the main detractors would be Straco

Straco: Disappointing 3Q as it is weaker than last year. The 3Q travel momentum did not seem to bring a boom this time around and as such it has been rotated out.

Is it time for Powermatic Data? 

No. I think that a better gauge would be at the AGM in 2025.

I would reallocate the Straco Stake back into Wee Hur. 

At 1H 2024, its new PBSA, Y Suites on Regent, had 55% occupancy rate. At a recent pulse check, the rooms that are remaining are studio/ensuite premium. The chances of occupancy rate picking up in 2H 2024 remains high.

Furthermore, a new PBSA will come into operations in 2025. The contribution is likely to be more than 10% of current revenue as it is at Sydney (where rentals are in 700s compared to other areas 300s 400s) despite only adding 409 to the current 5662 beds (7%)

As such, the portfolio would look like this

I apologize if the font used is different from usual. I did this post while i am overseas and not on my usual working pc.

(October 2024 Results) How i would invest in the singapore stock market if i had 100k of spare money

October 2024 Returns: 3.48%

Year to Date Returns: 27.84%

Since Inception (9 Sept 2020) Returns: 122.87%

October remains a muted period. 

There are changes that are being made and the new portfolio will be as follows. 

Exits: 

Huationg Global: As previously mentioned , I have decided to exit the position in-line with what i have done for my personal finance and after thinking through. I remain unsure how the company's costing structure will be for the 4 months after the dormitory operations has ceased as there will be fixed cost that might balloon depending on corporate decisions.

If they control the costing well, i might want to re-enter if the margins for other segments hold up / show improvement. There is also the factor that they are stronger financially and still might be able to have dormitory gigs as they mentioned that they are still on the lookout.

But i rather be on the safer side of things and wait till the full year results to reassess.

Fun TMI(Too much Information): Barring any positive upside developments, the top 20 Shareholders will see a change from the AR in 2024 to 2025.

Entry:

Far East Orchard: UK PBSA Part looks interesting. Explorative Stake . Will do more research in depth when i probably have some additional time i hope.

Straco: Usually would do well for Q3, so some speculative adding here. Tourist Numbers look ok.

Added:

Wee Hur: A sudden spike(to 50+ cents) and retracement(to 42 cents) after the announcement on a potential sale but it turns out to be early discussions.

Definitely I think adding more here is some what risky as it still is under a period of retracement following the initial hype and there might be more downside as the hype dies...but with the portfolio being up by around 27% this year. I guess i could afford to have some leeway to take some short term losses. There is also other positions that i can slowly divest off to add should it trend lower in the next few months if there is no announcements.

The risk to reward at current price is reasonable.

With the above actions, this brings my total exposure to stocks that has worker / student accomodations to 47%.

November should see some Q3 Updates from companies like Straco and Centurion

Concluding Thoughts

It has been close to.....4 years since this imaginary portfolio has been set up.

As i took a look at the initial positions and the positions now.....only 2 stocks have stayed there

They are Centurion (which i have added more in Aug 2023) and UMS (which i have not added or removed).

The initial other 8 stocks have all been removed. 

I think this is testament to how serious i think about things and how i rotate things around...lol.