2ndly. Improvements in Civil Engineering Contract Margins.
This is coupled with an orderbook of 506.5 million. A huge increase from End of 2022 whereby it was 415 million. A slight increase from 30 June 2023 where it was 484.4 million.
Disclaimer: This was meant to be published on 20 Jan but i think i have missed it.
If this post is published, it probably means that i had a good week(on 20 Jan) and decided to release my thoughts/predictions on the 2H and FY Results.
For Folks who are curious on how the previous time it went, i wrote a similar preview for 1H 2023.
2023 Revenue Fall Compared to 2022 is likely, with any growth in profits to come from margin expansion / revenue growth in Plush Stuffed Toy.
Revenue from Top Customer in 2022 will fall in 2023. For 2023 revenue, Japan and China should see revenue growth while US it should see revenue decrease compared to 2022.
I am still optimistic that we will see profit growth for FY 2023 compared to FY 2022.
Negative Factors affecting the company
Funko continues to show negative growth.
Funko, its main customer, continue its weak guidance that it has previously guided and this meant that we are going to see only slight improvements in Sales in 1H compared to 2H.
Funko recorded 491 million in revenue in 1H 2023. While 312 million is recorded in 3Q 2023, a guidance of full year 1065 million to 1105 million meant that 2H would come in at 574 million to 614 million.
A range of 16% to 25% growth compared to 1H 2023. But 2H 2022 was at 698 million revenue. Therefore this would represent a drop of 12 to 17% in revenue.
If we were to microscope it a bit further, Funko's inventory has been falling since 2022 and with a weaker revenue, i estimate it to be lower or at current levels. This implies lesser addition and would affect suppliers like Dream.
Toy Industry in US continue to see headwinds.
Export Data for Vietnam
Looking at the 'Toys, games, and sports requisites' segment of exports for Vietnam,
The good news is that revenue to US in 2022 2H is already lower than 1H which means we are not exactly jumping off from a huge cliff but the difference will still be there.
Vietnam Industrial Production Index
As such, as 2023 2H is around 8% lower than 2022 2H, i would estimate revenue to be lower in 2H 2023 compared to 2H 2022.
A slightly brighter spot is that the figures in 2023 2H is higher than 2023 1H
Possible Bright Spots
Sustained Theme Park Demand
In the theme park shops, there are definitely more Vietnam made products compared to in the Disney store i saw at Shibuya.
Exports Data to Japan in 2H Positive.
Cost Remains Acceptable
PVC Resin, ABS remain the major raw materials.
As such, i believe margins should be decent, similar to 1H 2023 and better than 2H 2022 as cost is still slowly falling from a high level.
As such, i don't expect negative surprises from cost as well.
Regional Export Data
Ha Nam Exports have increased since 2021 and in 2023 have hit record highs. 30% increase in exports value from 2H 2022 to 2H 2023.
Revenue from US is likely to be weak while revenue from Japan is likely to be stronger. However, the gain in revenue from Japan is unlikely to cover revenue from US.
As such, any profit improvements will come from margin expansion and i believe that should happen although the magnitude will depend.
With regards to demand from Shanghai Disneyland, that will be a factor in deciding profits as well. I believe 4Q might be a little weaker(5%-10% lower visitorship) than 3Q but should still remain at a good demand level. We might get some color when Disney releases its results.
Funko's revenue projection for 2024 in its earning release (usually in March) will also likely play a part in the analysis moving forward.
Currently, Dream is still hiring which is something positive as well.
Post 20 Jan Updates
Vietnam Industrial Production for Manufacturing of Games and Toys is off to a decent start. Coming in at 48% higher than Jan 2023 and 11% higher than Feb 2023.
However, the preliminary export figures for the 1st 2 weeks seem to indicate a very weak opening of the year which means there needs to be more monitoring of the statistics.
February Figures for Exports / IIP unlikely to be of much reference as there will be a 'Tet'. Similar to CNY Break. It is expected to last around 10-12 days. (from 7 to 19 Feb if i remember correctly)
China Disneyland Shanghai Tourism in 2023, has broken 13 million visitorship. This is actually a record breaking year. At the end of the year, a new segment of the theme park called zootopia has opened as well.
With regards to the Japan Disney Side
Sorry, i just realized Oriental Land has released their results up to 31 December 2023 on 30 January 2024.
My estimate says 7.53 million visited from Octoboer 2023 to December 2023.
Therefore, to hit the target, 6.27 million will be required. January Figures look to be around 2 million. It might make sense that the forecast is not revised.
On the Inventory end. Inventory has fallen from 16523 m as of Sept 2023 to 12893 m in Dec 2023.
Year End Thoughts
When i look at my results in 2023, it is definitely good. However if i were to describe it like a football match, it would be like scoring 7 goals in the 1st half and letting in 2 goals in the 2nd half to finish the match with a 7-2 victory.
While it definitely is a win and a big one, i would have to develop more tactics for upcoming matches as it is not every match where scoring 7 goals is possible.
While things have been smooth running for a few years, there is always a need to be conscious of what i can do and what can go wrong as well as knowing that what you might not know that might go wrong. Things can always go wrong at any point of time and that is just the harsh fact of life.
Motivation wise, i think compared to 2022, it is around the same or even lower this year as i have not made much changes or perhaps try to deep dive much lesser. Which is why i am actually shocked by the 2023 returns. Perhaps the gods have decided to give their blessings for 2023.
Hopefully my motivation picks up in 2024.
Facing a big allocation decision again for the 2nd year running, it was about allocating the funds from AAG Energy, the top holding of 2022 that would be key.
In End 2022, the larger positions (6% and above were)
AAG Energy (Delisted, Premium of <10%)
HG Metal (Sold at a Loss)
Medialink Group (Sold at a Gain)
Mainland Headwear (Still Holding a Small Position. 2023 Share Price Returns: -6.84%
-Reduced after a muted / negative guidance was given for 2022 2H. With New Era IPO rumored to be in 2024, perhaps we would be able to better observe the company and re-enter again.
In End 2023, the larger positions (6% and above are)
1. Dream International Ltd
-I plan to come out a post hopefully in January with regards to this. But in the meanwhile commentary, the strength of Theme Park in Japan continues to hold.
Officially, Japan Tourism Numbers have surpassed pre-covid in October 2023. That is good tailwind news.
2. Huationg Global
-1H 2023 is actually one of the lowest revenue(41.6 million) i have seen for its Civil Engineering Segment Since 2020.
-As such, will see if there is a rebound in revenue in 2H as order book of $484.4 million to be completed within the next 4 years would mean roughly 60 million per half year.
-Dormitory Operation should maintain, or any improvements would be positive. The possible negative factor would be higher inter-segment revenue affecting segment profit. With regards to rental rates, they have still maintained a high level.
-I wrote a post on it recently. Therefore, i will want to see the results to see if they can surprise by selling more exports.
-In terms of stability, it definitely has improved its financials in 2023 with improved profitability and improved rental in its investment property.
With that the 2023 Year End Review has come to an end.