Results Release Short Few Lines Layman Analysis (Tat Seng, A-Sonic, QAF, Yanlord , Challenger)

Tat Seng Packaging (SGX: T12)

-Profits greatly improved thanks to a more stable paper pricing in 2H 2020 compared to the downtrend in 2H 2019

-Company has also done well during the Covid Crisis, a trend not seen in its competitors.

-Gross profit margin for 2H 2020 improved year-on-year

-Improvement in profit margins despite higher depreciation cost

-Operationally good, dividends though were a disappointment. Could be due to spin-off and capex requirements.

-Spin off should imply a fair pe of at least 15 as long as it’s not at sgx but rather hk or china. Which is massive considering that it is currently trading at 5-6 pe in sgx.

However, what are the risk?

Paper Price fluctuations resulting in huge swing of earnings as seen in past few years

Industry is highly fragmented and lacks pricing power. While generally one could do its best to improve its business processes, it still conforms to the trend of the industry.

A Sonic Aerospace (SGX:BTJ)

-Results decent thanks to ‘Other Income’

-Normalized Earnings based on Q4 is roughly 800k each Quarter

-Based on Annualized and Profit to Parent ratio of 58%, Estimate roughly 1.8 million in profit

-Company Market Cap 24.854m, (Trade and Other Receivables + Cash – Total Liabilities) = 26.529m

-Effectively it is trading at 0 earnings valuation. With recent adding of shares by management as well.

However, what are the risk?

-Revenue Increasing at a % lower than Freight Charges. This could imply that it does not have much value in its value chain in passing cost or setting cost. Which would start to hurt its profitability, as seen in 2020 its ‘Revenue – Freight Charges’ is lower than 2019.

- Record Profits thanks to disposal but a dividend cut. Implying business conditions might be tough?

QAF (SGX:Q01)

-Results fundamentally solid however the re-valuation was a surprise. Will have to see the valuations of the spin-off eventually should it happens. EBITDA came in pretty close to estimation for the Primary Production Business.

-Spin-off would also reduce the gearing of the company as the Primary Production has higher liabilities to assets compared to the group as a whole.

-Based of its Bakery Operations of 7.3 cents, trading at around 14 PE for a Bakery Company looks rather appealing.

After removing primary productions from its market cap, the adjusted PE is about 10.

However, what are the risk?

Earnings Normalizing post covid, spin-off not occurring again due to lack of demand.

Yanlord Land (SGX:Z25)

-Profits come in around the same after normalizing earnings. Definitely unlike Sincere Property.

-Higher Sales throughout 2020, margins going down as per industry trend

-3 Red Lines. Yanlord Land seems to have passed all 3 requirements, meaning that it would be able to grow its debt further. To add on its investment properties (around 20% of its assets) should provide some breathing space in the future as it can be sold off if needed to meet the requirements.

- With roughly 4 years of 2020 Revenue’s sales yet to be realized, the next few years seem fine.

-Pockets of possible opportunities (Spin-off of project management, property management, investment properties to reits)

However, what are the risk?

Write down of Investment properties (After all increase in 2019 and 2020 seem rather unbelievable)

Curbs to China Housing Market (Especially recent reiteration of how housing is not for investing but for living emphasis in China)

Does not seem to follow trend of other China Property Stocks that are listed in China or Hong Kong. 

For example, on 25 February, most property stocks trended higher by 6% to 20% following news of 3 batches of land sale per year by multiple cities.

Unfortunately, this sentiment is not seen in Yanlord Land which could imply a different investor base and perception towards China Property Market. As such, any positive sentiments from China/HK is unlikely to be replicated in SG.

Challenger Technologies (SGX:573)

2H 2020 beat 1H 2020 (13.7m vs 9.6m). This is impressive considering that other income for 1H is higher than 2H. Recovery from Circuit Breaker effect and going into phrase 2 and 3 very well.

Excellent Inventory Control. Revenue and Purchase of Goods and Consumables have a very similar magnitude in change. Which is ideal as you would not want purchase going up 50% but revenue going down 10% or going up only 10%.

Market Cap of 193.32 million, Cash – Liabilities amounting to 30 million, full year earnings of 17 million without other income. Valuation does not look steep.

However, what are the risk?

Failed acquisition offer might result in being less shareholder friendly. As seen in its dividend despite a record year. The dividend is lower than 2018 despite profits being higher than 2018.

Fall in Employee Expenses, in any other year in normal business circumstances, that would be good productivity showing. However, this year, the employee benefits fell by 3.1 million which meant that either someone was fired, or the overall pay package has been reduced. 

To make things more puzzling, as of 2019 annual result they reported they had 41 stores in Singapore while in 2020 annual results they reported they have 42 stores in Singapore. 

From a shareholder standpoint, its good to see good results. But from an employee point of view, knowing that your company made 5.6m more before tax by cutting employee cost by 3.1m and receiving 4.8m more of other income. I don’t know how to view it.