(Realizing Losses) Full Divestment of Johnson Holdings 1955 Hkex

Perhaps taking realized losses is something that is difficult and sad to do, but having done my research and reviewing various factors which i will explain later on, i have decided to realized my losses which amount to around 17-20%.

To recap, Johnson Holdings is a cleaning company in Hong Kong that derives majority of revenue from government related cleaning projects such as sweeping roads, putting poison for rodents and cleaning of facilities etc. In FY 20/21  77.7% of revenue is from Government Related Tenders

At its latest financial year, it has generated 25.9 cents hkd of profit which translates to a PE of less than 4 as of the trading price of 0.98 as at 22 July 

Divestment Reason 1: Shaky 2nd half results

Johnson Holdings generated 13.5 cents in 1H 2022 and 12.4 cents in 2H 2022. On surface it looks ok, However if i were to break up the results, the gross profit margins is actually lower in 2H 2022.

1H 21/22 (9.61% Gross Profit Margin)

FY 21/22 (9.6% Gross Profit Margin)

Also another trend that can be seen is the revenue which has shown a slight decrease of less than 10% from 1H 21/22 to 2H 21/22.

Lastly, the receivables came in at an above normal level as it has increased more than revenue. Not by a lot to an alarming level but just one of those you see and sighs.

(Receivables +14.74%, Revenue +7.6%)

Divestment Reason 2: Inability to secure big contracts in 2022

One of Johnson Holding's reasons for its decent financials in this year and excellent financials last year was that it managed to secure 3.9 billion HKD worth of cleaning contracts in 2020 and 1.5 billion in 2019.

2021 was decent as well with 1 billion HKD as a follow up. However, 2022 has been close to lying flat as they managed to secure only 51 million HKD in the first 5 months of 2022.

To top it off, they have failed to renew 5 projects which was won in 2020 and 2019 which was worth 930 million HKD.

To make things worst, their rivals have just confirmed that they lost even more

(Rival won projects in Sha Tin, Yuen Long, Western and Tai Po)

(Green being ones lost pre announcement. Orange one being lost via the announcement)

The orange ones sum up to a total of 593 million HKD. It also meant that Johnson has been unable to secure contracts in other regions mentioned by its competitors.

Divestment Reason 3: Poor Public Perception and PR Response

In 2022, Johnson has been in the eyes of the public for bad reasons.

(A resident taking to facebook to ask if Johnson has done its job in preventing rats.)

(Tested for Covid, can't work but does not classify quarantine order by authorities as MC)

(An account from another worker, which said that they were not reimbursed for testing and the quarantine order as well)

(A rant from the same facebook user)

To make things worst, their PR / IR firm reply to my email was pretty bad.

In essence it did not answer a simple question of whether Johnson participated in renewing its current projects or any new projects. I had to look back at its announcements to realize they did not mention anything about whether they bidded for projects or not.

Therefore after considering the various factors

Poor Financials ahead

Poor Public Perception

Poor record of winning tenders this year and the momentum has followed through

Poor response from PR Team

I have decided to make the decision to fully divest it. I apologize once again for my sub standard in research.

On a more happy thing, i have finally collected the full set of my photocards 

(In my previous post, i was lacking 1)