Design Studio Group Ltd (SGX: D11) 1Q 19 Result thoughts- The pain worsens

Design Studios released its 1Q 2019 results on 8 May 2019. 
It turns out that the results were pretty dire.

Formerly a dividend darling, the company was barely profitable in 2017 and made losses in 2018.

In 1Q 2019, it made losses of S$ 6.193 million. In whole of 2018, the losses were only S$23.912 million. 1Q 2019 made up 25.9% of 2018 losses.

There were couple of details that stood out in its 1Q 2019 results.

Poor margin control

A quick count tells us that revenue is 15.535 million but the raw materials used, subcontractor cost and employee benefits totaled to 15.355 million. That leaves only $180k of profits after these 3 subtractions.
I would say there is probably 2 ways of looking at this figures.
1) Poor margin control leading to projects that are not even profitable.
2) Staff cost is mostly fixed therefore the cost did not decrease but instead increase due to expansion of business united or the commonly seen wage rise.

Sign of negatives to come?

We are told that there were project delays leading to lower revenue generation. Does this mean that there would be higher cost recognized in future quarters along with the revenue? This would mean more losses ahead should it happen. Personally I do think that this would happen.

Conclusion

Having been in the woods since 2017, it seems like the company is venturing even deeper into the woods and has been constantly eroding its equity.

The only bright spot is that order-book has been at a healthy level consistently. Though if these order book only serve to bring in revenue that result in losses, that would not be a bright spot at all.

It still remains an interesting company for me to take a look at its financial statements and try to understand how its business model works.



Posting a K-pop picture as usual.