The culprit without any doubt would be Dream International. Clocking in a -16% for the day amidst the news of a record breaking tariffs imposed on Vietnam.
This brings my portfolio returns down to 8.34% from 22% before today's developments.
I feel fine actually. i would rather have a 46% tariff than a 46% drop in Disney Thempark Visitorship due to reasons like natural disaster.
No, i have not sold out any shares of Dream. I still feel that it is too soon to sell as the developments are too fluid. Also revenue from US has fell to 42% only where as in 2018 it was 64%. Unless there is convincing weakness seen in asia theme parks, i think i will wait to see how the developments unfold.
In a recent communication with IR, i have asked if 2H 2024 represents the peak in Asia Theme Park as EBITDA and Revenue is the highest in recent years. The reply i got was
Of course with the tariffs and all, macroeconomy can change.
The company still has more than enough cash to cover its liabilities and still have 15% of its market cap being in cash. I believe they are more well positioned than smaller toy factories.
With regards to shift in production to other countriers.... Mexico has higher staff cost than Vietnam.
How about moving back the toy production to US?
Unless productivity is 8 to 12 times higher ..... i am not sure if it actually make sense.
How about ASEAN?
The only close competitor will be Indonesia and Phillippines. With 14% lesser tariffs and 29% lesser tariffs respectively.
If we look at labour cost, both countries are higher actually. As such, i have doubts if any of the other countries can pick up the manufacturing.....unless we are moving production to peru , brazil or argentina which also have higher labour cost.
Lastly, it will be the demand factor.......well we just have to monitor companies earnings release and the export figures which will be seen in May and subsequently i guess.
Ending TMI: -11.4% is around 16 months of my take home salary
In the latter part of the month following the changes, Centurion and Hong Leong Asia showed gains, propelling the portfolio from 3% gains as of 18 March to 13% gains as of 31 March.
It is a bit of a surprise as i have thought that folks might want to see the actual demand in building construction + motor in 1H 2024 for Hong Leong Asia first and also the REIT Composition of the Centurion Reit Spin-off.
Nevertheless, this is good news anyway. April is traditionally a slow month while May is a month for AGMs.
As mentioned previously, i will only make changes after some consideration and sometime in March.
Considering that i will be busy for the next 2 weeks. i will just write down the changes first today.
But first the above is a snap shot of the portfolio before any changes on as of 18 March
Mid March 2025 Returns: 3.67%
Year to Date Returns: 12.52%
Since Inception (9 Sept 2020) Returns: 155.99%
Changed Portfolio as follows
Rationale for Position Removal:
1) Wee Hur - Since i have cut off most of the stake in my own portfolio, i would do the same here as well
I express concerns over the investment properties fair value as well as the AUD Depreciation which would affect earnings and divestment value. However, i do concur that the company will be very strong in financial health after the divestment deal goes through.
If i am free i will attend the AGM...... i don't rule out re-adding back in the future if say prices of dorm rocket again or they give hint of very good special dividends.
2) Tat Seng Packaging - Although a good consumer theme play in china along with the recent news of consumption stimulations will likely benefit Tat Seng, it was meant to be a short term results play for myself so i will take a look again perhaps closer to its results release again in August to see if i should pick it up as a tactical play again.
Rational for Position Addition:
Belief that Pre-Cast Demand will be a strong theme in 2025 with many BTOs to be completed.
2 Companies that i believe will benefit are the 2 stocks that I have added.
1) Hong Leong Asia - Perhaps a more diversified play with the China Engine Market, SG Msia construction business. Overall i think that its low utilisation precast factory which is run as a joint venture should finally benefit from this trend.
2) Hor Kew - A much smaller company and much riskier play due to its profitability being very shaky before 2024. As such, the stake is much lower and will explore further to see if there is any chance to add more. One thing i feel is good is that its commentary of future prospect is not a copy paste each year. When they mention about concerns over cost and margins, they do reflect it in the following result.
1H 2022 Commentary: However, inflationary cost pressures of staff and raw materials may erode the Group’s future profit margins.
As a result 2H 2022 is loss making with lower gross profit margin than 1H 2022.
1H 2024 Commentary: To manage this, the Group has been tendering for projects with prices that are expected to yield higher margins, thereby improving its overall gross profit margin as old projects get completed and newer projects start deliveries.
As a result 2H 2024 Margins is 49% compared to 1H 2024 which is 29%.
2H 2024 Commentary: Demand in the Singapore construction industry was strong in FY2024 and this trend is expected to continue in the coming year. The order books for the Group also continues to be strong.
Companies that i thought about it but did not add / increase
1) Centurion. The belief of the REIT as a short term catalyst still holds.
2) Hafary. Might be a good BTO boost play but i realised that it has many lines of business and over 30% revenue is not from SG with revenue from SG showing some retracement as well.
3) Far East Orchard: Student Accomodation should still do well but i don't see any near term catalyst to bring the weightage up.
First off , sorry for the delay as it is results crunch period.
There will be no changes to the portfolio made in this post. This is because a lot of results were reported after trading hours on 28 Feb and as such even if i were to made any changes , it would have been largely 'after reading results' based on 'before results trading price' which makes no actual sense.
As such if any changes will be made either this week or next week or end march.
February Gains mainly driven by: Samudera, Moneymax, Haw Par , Tat Seng, Far East Orchard, Choo Chiang and China Sunsine
Stocks that recorded a negative returns in February: Centurion , Wee Hur , UMS
I will just pick some stocks out and comment on their results.
Moneymax: Good results which is not really surprising as Gold prices increase and other pawn brokers have posted good results as well. The gain in share price in February reflects it as well.
Samudera Shipping: As previously mentioned, the 2H is better. As such, it moves into the observation list for now and will observe from the business update 1Q 2025 on how it has done for the rates.
Haw Par: New plant in Malaysia slightly affected gross margins. Not a concern in the long run. I think the valuation of this stock is dependent on how generous the management wants to be. As such, given that there is a special dividend this time, it is good news which has improved its valuations for the time being. Revenue of Healthcare Segment is still on an uptrend so that is encouraging.
Given higher dividends from UOB, stabilizing margins and ramping up of Msia Factory, 1H 2025 looks encouraging.
Centurion: All eyes on the reit spin-off for now. Apart from that, i think folks will be keen to know how the Johor Dorms might benefit from the Special Economic Zone.
Lastly the recent JVs into China and HK.....the amount invested will probably be crucial as well to assess if they will make a difference in terms of top and bottom line.
Wee Hur - I left this as the last as it probably is one of the toughest to talk about.
Its either i hold this till after the announcement regarding the 'special dividend' is announced which is supposed to be considered after the disposal is done or i would exit this in March.
The results don't look good as paper losses is made but the question i would ask myself in deciding whether to sell or buy is....
1) Was the bad results expected? What is the cause?
2) What is in for the company moving forward post disposal in terms of balance sheet and earnings wise?
Thats all for the reporting this month. I believe 1st week of March will be volatile as investors respond to the share price fluctuations.
Gonna paste some of my personal favourite K-POP Pictures and hope that they will bless me for the important March .
I wonder if the above image is the thoughts of some of the readers when they read that i was not going to answer any questions about Wee Hur. It is because answering Wee Hur will be really long . I will write it below if anyone is interested or wants more information after reading the facebook post.
So here we go...
Q1) Was the bad results expected? What is the cause?
Construction Segment recording a negative 9 million in segment profit for 2H 2024 vs 1 million in 1H 2024. This is definitely not expected given the expectation of a better construction environment.
16 million of other losses. Among the other losses, 7 million is from fall in AUD. Apart from that there is some impairment and fv losses as also seen in previous year.
28.7 million of fair value loss from investment properties. The company's investment properties consist of fair value + lease liabilities. Investment properties of 185m (11m from AUD Property Development Segment, 81m from Lease Liabilities, 40m Fair Value from Tuas South Dorm, 53m Fair Value from Pioneer Lodge Dorm)
How does the company record a profit in the worker dormitory segment?
Revenue +/- FV Loss - Lease Liabilities - operating cost = Segment Result
84,690 - 37,353 - operating cost = 31275 (2024)
Operating Cost is estimated to be 16062.
60% Ownership means profit of around 18 million is pretty good. Unfortunately corporate cost + construction segment loss is already 24 million. Add on Australia development loss of 10m...without the PBSA revaluation, the losses have been more than profit.
Folks have to be aware that FV Loss is accounting loss. The segment recorded a profit so cash flow is still positive actually and this means that on 1 hand investment properties drop in value but cash / trade receivables do increase.
That's why dividends can easily be increased. Not counting the PBSA Disposal, 101 million of cash +137m of receivables + 33m of financial assets is against 145m of payables + 134m bank borrowings. It is pretty close to 1:1 actually.
2) What is in for the company moving forward post disposal in terms of balance sheet and earnings wise?
Post Disposal the cash to borrowings payable ratio will definitely be more than 1:1. It will be around 1.93:1 if we estimate 270m of cash in the bank. The company can easily distribute up to 28 cents per share (current price of 47.5 cents) while still maintaing current capital structure.
Dorm Cash Flow is around 68 million for 2025 if revenue holds. 60% ownership is 40m.
Earnings will definitely sharply decline compared to 2024 due to lack of fair value PBSA revisions as a result of reduced stake. But still there should be some gains around (30m i reckon?) from the disposal
30% of the new dorm i reckon would bring in about 2m?
13% ownership of the PBSA i reckon it will bring in about 5m each year.
Total 7m.
New Dorm will partially operate , which will be a key decider in profits as dorm is the most profitable segment.
Can construction improve? Another qn to ponder.
3) Is the current price still attractive?
Attractive based on book value , financial health and realisable value but unattractive based on earnings as of current information
Book Value wise, over half of market cap is cash after the transaction. With easily 40m cash flow from dorm alone, they can distribute easily 4 cents this year, 5-6 cents in 2026 and if the leases are extended then it can continue on.
With possible increase in NAV if construction break evens.
If construction can break even or make a profit and the newer dorm gets into operation quicker, this will make the earnings be more attractive. If not then 2025 we will just get by with the gains made from the PBSA Disposal (around 3 cents) while waiting for 2026 which has the double dorm effect. Then any potential catalyst will be renewal of lease at favourable terms followed by 2027 when the lock in period of 13% stake has lapsed followed by the new pbsa in Adelaide being completed (currently planned for July 2027).
IGG (799.HKEX) released a positive profit announcement after trading hours on 7 February
(On paper, it looks great as profits grew by 3600%. But in real, it was really expected if anyone had seen the 1H 2024 Financials)
As such, using 1H 2024 Financials to reference to see if there are any improvements
Positives
1) App Business Revenue went from 409 million in 1H 2024 to 691 million in 2H 2024. Representing a good 68% increase and a positive traction is seen.
2) Doomsday and Viking Rise both performed better in 2H 2024 compared to 1H 2024.
Doomsday 2H 2024 = 507m vs 1H 2024 = 493m
Viking Rise 2H 2024 = 391m vs 1H 2024 = 309m
3) Revenue is up as well compared to 1H 2024.
2H 2024 = 3.005 billion vs 1H 2024 =2.735 billion
Negatives
1) Profit from Core Business in 2H 2024 is lower than 1H 2024.
2H 2024 = 294 million vs 1H 2024 = 356 million
Conclusion
Scorecard: 6.5/10
Lords Mobile Revenue likely have decreased which led to the drop is core business profit as it is the game that has the least reinvestment of revenue into marketing and ads (and as such better gross and core profit margin)
It is not a bad result from the looks of revenue but in terms of profit it definitely is not as ideal.
At $4.51 HKD , it represents a PE of 8 which is not expensive when compared to index but is relatively expensive for small and mid cap hk games coy.
Much attention will be on the growth target and profitability of its App Business for 2025.
If they can pull off another 50% Revenue Growth from 2H 2024 to 1H 2025, this probably means 2 billion revenue(in 2025 for App Business) It would represent a good growth driver if profitability follows.
I think it will likely retrace again on market open on Monday.
Much attention will turn towards the earnings call in March as management would have data of 1st 2 months of 2025 to share as well as their view of 2025 prospects.
Lastly, in Citi's research report, it predicted net profit of 673 million and revenue of 5.94 billion with a target price of 4.50 HKD. The net profit of 580 million and revenue of 5.74 billion both missed their estimates.
First off , sorry for the delay as it is the Chinese New Year period.
Happy Lunar New Year to the readers.
January is a surprising month actually. With Wee Hur, Centurion , Haw Par and Moneymax leading the gains.
Centurion quickly announced the news of a Reit Spin-off. I would probably have to wait till the prospectus is released before evaluating the whole spin-off as a whole then. I think this would be a good time for a spin-off actually, with the next good time being in 2030 after the dormitory rules have set in and market forces readjust the prices of dormitories depending on the construction demand then.
A stock idea had flashed past my head in the early days of January. I was thinking about how this stock would be placed in the portfolio and rather what i had to remove if i were to add this in.
After some consideration, i have made the following change heading into the Crucial February Earnings Season.
Please refer to the image below for the changes
I made the tough decision to exit SUTL Enterprise and made the speculative play into adding Samudera Shipping.
A slight worry would be the hotel situation in Sentosa as there has been the oil spill in June and the increased competition of rooms in Sentosa. This can be seen in the results of CDL Hospitality Trust. The hotel business although a small part of SUTL Enterprise, would serve as a good driver of revenue still.
While the marina business will be stable in Singapore....the concern will be the start-up operating cost for the Phuket Marina.
Adding both concerns, i have decided to switch out of the position as i don't anticipate any exciting happening from its results.
Samudera Shipping is a company that has traditionally lagged behind the freight rates and seems to have been forgotten
With stronger rates in Q3, i think there could be some positive momentum for this to be the same or sustain.
Given the valuations seems attractive on the back of a strong q3 might be spilled over to q4 and beyond for at least 12 months......my view would be that it is worth to hold this thru the earnings season and monitor again from there.
We will evaluate again as the companies in the portfolio report their earnings in Feb.
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.
