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.