Evaluating the Disposal Announcement by Wee Hur.

 Wee Hur announced that it will be disposing a huge proportion of their stake in the Australia PBSA. The deal values the student properties at A$1.6B which is what was mentioned in the media previously.

No surprises there.

Details of the disposal in brief

-Proceeds of S$320 million or 34.8 cents SGD

-Record a gain of 9 cents SGD

-13% stake retained

-Deal expected to complete sometime in 2025

Is this a good deal based on the current price of 0.475?

Current Price indicates a market cap of 436.64 million

13% of A1.6 billion would be 178.1 million SGD (Student Accomodation)

2H 2024 Profits of Australia PBSA (Estimated around 12M, based on rental revisions and operating profit of $20.6 million in 2023)

117 million of spare cash

95m of receivables

Workers Dormitory (26M Profit in 1H 2024 but only 60% stake so 15.6M)

Bartley Vue Development (TOP 2026)

Since total liabilities is around 320 million as well, this means a clean sweep of the balance sheet to no liablities.

Doing a simple calculation

436.34 million -117 million (cash) - 70 million (discounted receivables) - 12 millions (PBSA Profit) - 178.1 million (Stake in PBSA)

= 59.24 million

This is the current value of the workers dormitory + the Bartley Vue Development which is definitely a big discount.

Assume a low 8% net profit on proceeds of Bartley Vue = 15.76 million. 75% interest = 11.82 million

The 15744 bed dormitory runs till 2026

The 10500 domitory runs till 2029. Expected to be fully operational from 2025

Both have 60% stake.

Estimating around 16m of Profit for each half for the 15744 bed. Till 2026 this brings in around 80M

The 10500 bed will bring in around 106 million until 2029.

Assuming no extension is provided (it was granted in 2023)

The undiscounted value is around 200 million already compared to current valuation of 59 million

Not to forget the australia land, construction,fund management(45 million) , alternative investment (13 million) are free.

Realistically speaking. I think the company should be worth around 0.75 at least.

We would see what the market thinks of this deal. I think the PBSA Profits in 2H might be decent as well (exceed 12 million estimations).

In the long run, whether this deal goes through or not, it at least ascertains the value of the PBSA.

Forgot to add that their 30% owned PBSA Y Suites on Margaret in Sydney is not included in this deal. As of 31 December 2023, it was valued at 90 SGD Million. As such, it is another 27 million to Wee Hur. Roughly 2.9 cents per share worth. This PBSA will only come into operation in 2025. Given the positive revisions seen in 2024, it is likely that it is worth more than this figure already.

Late Night Sudden Short Thoughts on My Portfolio

Boring Post Ahead

Using stockscafe, it has been a convenient way for me to see the different statistics provided.

One of the recent table that i have seen was pretty alarming for me although i do feel that it probably is true

In short these past 3 years, i have not been able to inject capital into the portfolio.

Realistically when i see this stat, the first thought that came to my mind was actually how much this amount actually relates to the portfolio in terms of %.

To give an example in portfolio management, if the amount you can inject is 20k while your portfolio is 200k. you are injecting less then 10%. This means that what is in your portfolio is probably more important than what you do with that 20k.

Of course if you only have 5k and you want to inject 20k then these 20k is more important

I guess most folks would know this. Then the question becomes, instead of thinking what new things to buy with these 20k, would it be better to think about how the 200k should be positioned first?

This only applies for mostly stock picking.....if its index purchases and just reaping market returns and volatility then it does not matter much.

This is where opportunity cost probably steps in. However this topic of opportunity cost might get too complex and boring.

1) It depends on how many stocks you have researched, what are your odds of them performing well, how confident you are

2) Versus the current stocks you hold, their outlook based on your research, how much your research is relevant.

To cite a recent example, Powermatic Data is a stock i have talked about often. But i usually say the same thing that i say in telegram.....is a stock that i would recommend my parents to hold but i would not hold it myself.

The holding period for this company to show potential returns is too long (2026). As such, the opportunity cost is probably too large for someone like myself who sees it as being impt. But for e.g my parents would not bother such things so they can have a longer holding period so its totally ok as the balance sheet is still solid.

Of course there is every chance i pick another stock and it does badly while powermatic starts to show value earlier and it makes me look like a big miss but that's stock investing and such things might happens anyway. 

Secondly i think there is always the talk about what are your returns .

I think everyone has different risk appetite, different ways of viewing investing so as long as 1 is happy with their returns based on their way of doing things then all is good. But if u are not happy with your own returns then perhaps a change of way of doing things is probably required.

For example , you cannot be putting your money in t-bills and thinking you will get 10% a year.

Another example is 33.1% returns made over 3 years can be seen in 2 ways

a) Year 1: 0%, Year 2: 0% , Year 3: 33.1%

b) Year 1: 10%. Year 2: 10%, Year 3: 10%

People can talk until the cows come home whether a or b is better but end of the day it really depends on how much you inject into the stock/portfolio 

Someone who keeps putting in money each year will be better off with (a), someone with a lot in the portfolio already and cannot put as much money in will prefer (b)

Conclusion: Sometimes it is not about whether this company has good cash flow, good balance sheet, good income statement, good prospect that really results in a buy. Opportunity Cost might be a good consideration as well to think about.

But of course if the strategy is just to scatter as many stocks and hope that you pick more good ones than bad ones then opportunity cost might not matter....but still i guess there is a need to have some effort to keep track of the business prospect of the various stocks...at least for me thats how i think of it.

Sharing a photo taken which was part of the concert package in one of the concerts i went this year 😂

(November 2024 Results) How i would invest in the singapore stock market if i had 100k of spare money

 

November 2024 Returns: 3.81%

Year to Date Returns: 32.71%

Since Inception (9 Sept 2020) Returns: 131.35%

November is a month of gains. Mainly from Centurion, Wee Hur , Haw Par and China Sunsine

Centurion: I have mentioned briefly from my facebook post. I think that the rental revision for SG Worker Dorms is likely to have peaked and it is unlikely to see sudden 10% increase in price per bed quarter on quarter or year on year moving forwards. Any increase in demand will likely be from the increase in beds.

For the msia side, there has been some articles with regards to the RTS Link and construction activities which might bring a boom to the Msia Dorms. This is one area worth monitoring.

1 aspect analyst has mentioned would be the 'potential value unlocking' which was mentioned in the results presentation slides. It remains interesting and to be seen which unlocking is done if any.

The share price briefly tanked after the 3Q Business Update but then rised again to a higher level afterwards.

Haw Par: I think this is in-line with the movement of bank stocks so there is nothing much to talk about. A beneficiary of 'Higher for Longer' that is for sure.

China Sunsine: Results Stable. At 6 PE, this is rather acceptable. We are not in a peak chemicals price so it is worth to just hold on, wait for the company to expand productions and be ready again for the upswing.

Wee Hur: The australia univeristy cap is not implemented. In most reports i read, it seems like international students are not a large driver of the rent increases ....therefore i have never really regarded it as something good or bad.

I think rates going up are good but if it is unsustainable, then it results in lower demand or larger unpleasure sentiments which will affect policies moving forwards. 

Fortuntately, from Centurion's slides, it mentions that 'occupancies and rental revisions expected to remain at healthy levels'

1 of the main detractors would be Straco

Straco: Disappointing 3Q as it is weaker than last year. The 3Q travel momentum did not seem to bring a boom this time around and as such it has been rotated out.

Is it time for Powermatic Data? 

No. I think that a better gauge would be at the AGM in 2025.

I would reallocate the Straco Stake back into Wee Hur. 

At 1H 2024, its new PBSA, Y Suites on Regent, had 55% occupancy rate. At a recent pulse check, the rooms that are remaining are studio/ensuite premium. The chances of occupancy rate picking up in 2H 2024 remains high.

Furthermore, a new PBSA will come into operations in 2025. The contribution is likely to be more than 10% of current revenue as it is at Sydney (where rentals are in 700s compared to other areas 300s 400s) despite only adding 409 to the current 5662 beds (7%)

As such, the portfolio would look like this

I apologize if the font used is different from usual. I did this post while i am overseas and not on my usual working pc.

(October 2024 Results) How i would invest in the singapore stock market if i had 100k of spare money

October 2024 Returns: 3.48%

Year to Date Returns: 27.84%

Since Inception (9 Sept 2020) Returns: 122.87%

October remains a muted period. 

There are changes that are being made and the new portfolio will be as follows. 

Exits: 

Huationg Global: As previously mentioned , I have decided to exit the position in-line with what i have done for my personal finance and after thinking through. I remain unsure how the company's costing structure will be for the 4 months after the dormitory operations has ceased as there will be fixed cost that might balloon depending on corporate decisions.

If they control the costing well, i might want to re-enter if the margins for other segments hold up / show improvement. There is also the factor that they are stronger financially and still might be able to have dormitory gigs as they mentioned that they are still on the lookout.

But i rather be on the safer side of things and wait till the full year results to reassess.

Fun TMI(Too much Information): Barring any positive upside developments, the top 20 Shareholders will see a change from the AR in 2024 to 2025.

Entry:

Far East Orchard: UK PBSA Part looks interesting. Explorative Stake . Will do more research in depth when i probably have some additional time i hope.

Straco: Usually would do well for Q3, so some speculative adding here. Tourist Numbers look ok.

Added:

Wee Hur: A sudden spike(to 50+ cents) and retracement(to 42 cents) after the announcement on a potential sale but it turns out to be early discussions.

Definitely I think adding more here is some what risky as it still is under a period of retracement following the initial hype and there might be more downside as the hype dies...but with the portfolio being up by around 27% this year. I guess i could afford to have some leeway to take some short term losses. There is also other positions that i can slowly divest off to add should it trend lower in the next few months if there is no announcements.

The risk to reward at current price is reasonable.

With the above actions, this brings my total exposure to stocks that has worker / student accomodations to 47%.

November should see some Q3 Updates from companies like Straco and Centurion

Concluding Thoughts

It has been close to.....4 years since this imaginary portfolio has been set up.

As i took a look at the initial positions and the positions now.....only 2 stocks have stayed there

They are Centurion (which i have added more in Aug 2023) and UMS (which i have not added or removed).

The initial other 8 stocks have all been removed. 

I think this is testament to how serious i think about things and how i rotate things around...lol.

Thesis on 306 HKEX. Kwoon Chung Bus Holdings Limited . (My Latest Purchase)

Company Introduction

Kwoon Chung Bus Holdings is a transport operator in HK and China. Its main line of business are as follows

1) Operating of Public Bus Service in HK (Under New Lantao Bus 'NLB')

2) Operating of Non-Public Bus Service in HK (Under the Kwoon Chung Brand)

- An example of this would be providing bus services to transport kids to school and from school to a stop near their home.

3) Operating of Cross-Border Transport Services (Bus / Private Vehicle) (HK - Macao - China)

-An example can be from Hong Kong to Shenzhen / Macau / Zhuhai / Qian Hai / Zhongshan

4) Operation of the Bipenggou Tourism Site and a Hotel in China.

-Bipenggou is a tourism site in Sichuan. 

Company Financials

A look at financials and folks can tell that it has not been good for them in the past years

Revenue (2.1B in 2024 vs 2.97B in 2019) is still lower than pre-covid and profitability (32m in 2024 vs 253.6m in 2019) is far lagging behind. 

Thesis

A turnaround play riding on an interesting theme. It is worth betting that the half year result ended 30 September 2024 would surprise on the upside.

This theme is known as 北上 . It is a phenomenon that has hit Hong Kong in recent times , which is HK Folks heading up to parts of China during weekends and even on normal days to spend time / money there.

The reason for heading up to parts of China can be broken into 2 parts. 

Part 1: Things are cheaper there and are more value for money. 

(Dentist and Food is much cheaper there)

(Even meds is much cheaper there)

I am sure folks from Singapore will resonate to this because of neighboring effect.

Part 2: Accessibility has greatly improved

There are now many ways to go into China. With the HK Macau Zhuhai Bridge as well as the Zhongshan Shenzhen Bridge, these has improved accessibility for folks to go into China.

Reasons for Buying into this Thesis.

1) Cross Border Numbers has greatly increased.

Macao Crossing Data from April 2024 to July 2024 is the highest since Covid.

(Shenzhen Bay Crossing Traffic has increased in general the past 4 months as well.)

(Lok Ma Chau Crossing Traffic has increased in general the past 4 months as well.)

(Trend still going strong)

2) NLB Bus Ridership has recovered.

While it is not back to 2019 levels, it is getting close. From April 2024 to July 2024, the numbers are much higher than the same period in 2023 as well.

3) Price increase still seen in Non-Public Bus Segment. International School Population in HK has hit record high.

(23/24 $17810)

(24/25 $18830) An increase of 5.7%

It is good to see that there is still price increase in the services each year. Although the company does not provide a breakdown to which how much does transport services for student make up for this sector.

(While it might not be a strong link, it is good to hear that there has been higher amount of students in the segment that the non-public bus segment operates in)

Conclusion

I think it will be a better half for Kwoon Chung. But it might be really difficult to estimate the revenue because how much it will be able to capture in the cross-border demand.

 If it is able to go back to its pre-covid profitability or even exceed it, it is definitely cheap  as i think the trend of folks going up to China to spend will continue. 

I think there might be some concerns because of its balance sheet being some more levered as it is a business that has high operating leverage (buses) and it is funded via borrowings as well.

 As such, the execution might not be as easy as it seems but i still see it as a business with high operating leverage that should benefit much more from increased ridership.

Considering the above factors and my portfolio as a whole, i have decided to allocate some % to this stock. 

I am capping my exposure for this stock at a max of 15% of my assets. But as of now, it is not at double digits in terms of weightage.

Other stocks that could ride this theme that i have considered are as follows.

Travel Expert (1235 HKEX) - Tour Package Operator. However, unsure how much it benefits from cross-border travel even though it runs a platform that sell cross-border related packages. Its packaged tour has recorded good growth and September Tour Group is a record high.

Faces problems of ultra low liquidity and 1H / 2H 's revenue and gross profit margin has high variations. As such I am unsure if it would benefit from higher revenue.

Transport Intl (62 HKEX) - Operator of KMB. While KMB does serve cross border, it still has a much larger focus in domestic operations

Hans Energy (554 HKEX) - Recent acquisition of Citybus in HK makes it a relevant play. However, gearing becomes rather inflated after the acquisition of Citybus and Citybus falls under the same category as KMB so the cross border exposure is smaller.

MTR Corp (66 HKEX) - Considering this stock is up 20+% in the past months and also a large cap that is related to the market sentiments. I had my reservations. However, its patronage data does indicate a better 2H and it also has a good pipeline of property revenue to recognize.

At 18 PE.......it is almost priced for growth in the 2H as well. Though I have to say this is definitely a much direct beneficiary from the 北上 theme and it is a safer company (structure of shareholding , ease of tracking the patronage data etc)

HSI PE.

(MTR Patronage Figures) As you can see, Jul and Aug Cross boundary and HSR figures have improved. I believe Sept figures should be much higher due to golden holiday effect.

K-Pop Pictures Spam Time😂

It has been way too long since i saw this group.

Also some spam of photos from my recent trip

(IN-N-OUT is really good)

(Panda Express is decent)

(BCD Tofu at where it started.......LA)

Seems like a photo spot for many

As usual, if you can stand the Pictures spam and reach here.....i would provide my non accurate prediction of the revenue of the company

I think the China tourism segment should see around 10% growth. 

Limousine and Non-franchised bus should see around 20% growth.

Franchised Bus would see slight decline of around 3-5%. 

The hardest to predict would still be Nonfranchised Bus and Limousine as well as how much of this increased revenue seeps into profit.

With the opening of Shenzhen -Zhongshan bridge on 30 June 2024 and the strong outbound travel from HK to China figures seen in Sep.....it makes the forecast difficult.

Short Thoughs on Recent HK Market Rally

 

HK and China Markets have gotten a lot of interest / writing and video coverage in the past weeks.

2800 HKEX the tracker fund has rised by 22% in the past month. There has been many reasons given for this increase..........from fiscal stimulus / under allocation to HK / China to covering of short interest and buying power increased as China Financial Institutions are given the 'free-pass' to buy stocks / golden holiday strong demand...... the list goes on

My personal thoughts are that the focus should still be on individual stocks. Perhaps one should ask if there is a fiscal stimulus, does that affect your company.....if your company is Link Reit for example, will fiscal stimulus affect the HK Property Demand?

Or maybe another example will be Mainland Holdings where at least 85% of revenue is from US. It is unlikely to benefit from any fiscal stimulus from China

I think trying to understand the link between policy to individual companies will be more key.

I think it is rather scary if you have a company that trades at 20 PE and after a 30% rally now it trades at 26 PE. There is more focus needed to think about the link and whether this company can deliver growth because if it does not, the sell down will likely happen.

However if you have a company that is 4 PE...a 30% rally gives the stock a 5.2 PE....which will probably be cheap if it is not cyclical or still represents a lesser risk compared to a 26 PE. 

The level of growth being priced in for both cases are likely to be different.

From a more abstract POV, China's PE after the recent increase is still 10% lower than the 10 years average

But if you look at HK PE, it seems to be slightly overvalued around 8%

In my watchlist, there is still companies that show negative share price performance this year while the tracker fund has rallied 29% this year

(The green figures on the right indicate the negative share price performance year to date)

Perhaps i will start some dumpster diving for some stocks that have underperformed the market this year and might show good results.

As a whole, the rally is good and perhaps some small cap stocks might catch the eyes of investors who wants to invest in the hk markets but does not want to go into the large caps like the rest

But on a company business / financial performance level, policies have to be actually in place , well articulated and approved before we know if they will see growth from the policies.

(September 2024 Results) How i would invest in the singapore stock market if i had 100k of spare money

 

September 2024 Returns: 9.22%

Year to Date Returns: 23.54%

Since Inception (9 Sept 2020) Returns: 115.37%

Main Drivers of Returns in September....basically close to the whole portfolio, which lead to a 9.22% returns.

The main drivers are Wee Hur, Money Max, Centurion , China Sunsine.

Overall, nothing much to be unhappy or to change apart from probably Huationg Global which i would rotate out this month to indicate a more reflective thought on the whole situation.

Recent Thoughts and Updates on Portfolio (Returns Slip to 4.52%)

 

(Portfolio was at 4.52% Returns YTD at 5 August)

Recently I have not been updating much, there is just too much firefighting to be done first before i could post.

Before i begin, the September 'How I would Invest' SG Portfolio Update will be slightly delayed as i will only be available to update it a few days after the start of October.

From the chart above, you can see that the returns have dropped sharply to 4.52% from a peak of above 25% before recovering back to around 20% currently.

What led to 25% returns before June?

Dream International recording good FY 2023 Results. Share Price was at $5 around that period

Huationg Global held steady at $0.16 on the back of decent FY 2023 Results

Saint Miguel HK Share Price was at $0.90. A YTD Gain of around 14%

What happened after that? (June to August)

Dream International Plunged to close to $4 after results showed profit and revenue fall but gross margins improved slightly and dividend is maintained. It was around 50% of my portfolio so the returns attribution was close to 10%

Huationg Global decided to issue a profit guidance to inform investors they did not manage to renew their contract for the management of the dormitory. Share Price went from $0.16 to $0.124 in the next few days. It was around 30-40% of my portfolio so naturally i took a 6-8% loss in returns attribution.

San Miguel went up to around 1.10, 20% gains before correcting back to $0.85 levels after poor results.

Although Centurion went up to $0.6 and subsequently $0.7 levels, it did not really helped much because it was only 4% of my portfolio on initial purchase. It is now about 7% of the portfolio.

IGG continued to tank and tank and tank. I made 4 tranches of purchase during this period and the share price has actually reached a low of around 2.5 levels before its results release in August. A

To give a rough estimation, each purchase was around the same value in total. Therefore, the first 2 tranches at 3.09 and 3.14 already suffered a 20% loss in just less than 3 months.

The above factors lead to a record low of 4.54% at 5 August.

The first thing i thought about was .....is this a repeat of 2018. That trauma has always been in my mind whenever i get a good start to the year as i will always remember how i went from 25% to -8%.

The process has always been largely similar / consistent this year.....very different from how i would have done things in 2018.

The probable thing i done more as the returns went down was to do more research and also think about some other stocks that i would be keen to allocate to.

Fortunately, things went well after that

Huationg recovered around 10% after a solid 1H 2024 Results

Dream showed some recovery but many headwinds still persist (will talk about this later)

New Initiated Position Wee Hur showed some quick gains.

IGG Bounced over 40% from its Low on the back of Solid Financial Results and Desirable July Figures.

All of the above steered the return up again.

Thoughts and Likely Actions

Looking forward, the earnings season is coming again for stocks that are going to report September financial year end results. Something that i would have to look at again 

1 ) IGG was meant for a quick burger flip but the excellent July figures means i would likely track its games on a monthly basis and make a decision again. There has been addition by management as well.

2) Dream is a tough one. July and August Export Figures from Vietnam is really decent and China Disneyland seems to have been resilient.

But the typhoon hitting Vietnam in September seems to have derailed some export momentum and Shanghai is also hit by the typhoon recently which would likely affect theme park demand. At Japan, a recent bloomberg article mentioned about the heat resulting in lower numbers. Something that i have observed as well as it seems like figures might be 10-25% lower in August.

As such, October to December will be crucial and also to see if the US Toy Companies have good results or indicate that de-stocking is over.

After a lot of hype about Pop Mart, it still plays too small of a part to influence anything really. Funko and Spinmaster will be more crucial

Operations at the company seems to have improved with margin improvement and business operations improvement like robotic arms and automation etc . This is a good sight as wages have went up around May/June Period (10-20%) so this would likely be seen in 2H 2024. Fortunately wages make up around 25.5% of revenue in 1H 2024 compared to 23.9% in 1H 2023.

The in theory right investor would probably find something that is worth more in the meantime in terms of risk reward ratio and opportunity cost.

The better ones in theory will be able to be right in the short term. As for myself, i would have to start having a list of alternatives while continuing to monitor the situation in 2H 2024. As the revenue usually is much higher in 2H, there is more pressure on 2H to perform than 1H.

3) Continued Trimming down of Huationg and sourcing for possible additions. Continued monitoring of Wee Hur.

This is purely a favourable view towards workers dormitory and student housing while Huationg will transit back to a construction and related play.

As at current moment, any cash will likely be from selling of Huationg(continued trimming) or selling of Dream(due to really bad data seen from its related peers). Unless any other positions have takeover or bad things happening, it is unlikely it will be sold as of now......

On a deeper level that i have to think about as well, Dream is around half of the portfolio. Is the risk return worthwhile for this positioning? Although on the dividend end, it has maintained and it has paid a good yield last year such that the current yield is around 13% while balance sheet is heavy and payout ratio is around 45%.

(August 2024 Results) How i would invest in the singapore stock market if i had 100k of spare money

 

August 2024 Returns: 5.29%

Year to Date Returns: 13.11%

Since Inception (9 Sept 2020) Returns: 97.20%

August turns out to be good and portfolio records a positive return

Main Attributers would be Centurion, Huationg, Moneymax

There is just too much results reporting in August so i will just point out a few.

UMS = Cyclical in Nature, continue to await the upturn

Moneymax = 64% increase in profit YOY. No surprises there as gold prices soar.

Tat Seng Packaging = Gross Profit Improvement and better net profit is in line as this is seen in its China Peers already

Haw Par = 1H 2024 better than 2H 2023. Dividends still the same unfortunately. 

Centurion = Pretty In-Line Results. The expectation is that growth will be higher in 2H due to more positive rentals revision seen down the road. 

Wee Hur = Need a bit more time to break this down, it is decent but will need more time to decide if this can be a potential 2025/2026 multibagger

Overall, due to a rather busy August, I have decided to keep things as they are for the time being. But for sure I have been thinking abt 1 or 2 changes here and there.

Recent Positions Thoughts (Huationg , Dream)

Recently have not been posting often so i will post an update on my thoughts on the 2 positions that i have held and have reported results

Huationg - Nothing too surprising as results will likely be the best it will be for some time unless construction and inland transports margins outshine and cover up the dormitory shortfall in 2H 2024.

2H 2024 will probably show a closer normalized earning of life after dormitory or life assuming no new dormitory business is found.

Company has also turned a corner by having finance income > finance expense. Something that is really unimaginable for construction companies if you ask me 5 years ago.

Strong Cashflow has always been the case for this company in recent times, this continues to be the case.

My few points that I would take note of will be

1) Subcontract Cost. This has tripled even though contract works revenue has only doubled. This has also slightly affected segment result margin. From 8.7% to 7.5%. However, if revenue keep increasing, I am ok with the 7.5% margin actually

2) Sale of Construction Material Segment. Perhaps a less talked about segment. It has recorded the following results

(In’000)	1H 2023	2H 2023	1H 2024
Revenue	1,985	4,473	6,235
Segment Result	36	570	963
Depreciation	193	393	468

To be honest, i think this is pretty remarkable although I have little idea what they are selling but to record a 68% gain in segment result on the back of increased depreciation is something worth keeping an eye on.

3) Inland Logistics Segment

(In’000)	1H 2023	2H 2023	1H 2024
Revenue	8,327	9,646	8,646
Segment Result	79	1,931	632
Depreciation	192	438	1103

Perhaps a slight disappointment will be the results being not as consistent. 

Conclusion: If the Construction Material Segment and Inland Logistics Segment are tightly related to the construction revenue, there is a good chance of earnings improving in these segments in 2H 2024. To say that it will be enough to cover the shortfall of the dormitory is still being too optimistic.

I would still look to reduce my position and redeploy in other counters. But I would be okay with holding another half year and re-assess its results again to see if the other 2 segments can pick up along with the construction segment and also to see if the company has managed to make traction in the dormitory business.

Dream International

Key Highlights

Revenue Fell 7%

Net Profit Fell 17%

HK, China show improvement in revenue while USA and Japan recorded lower revenue

Slight Margin Improvement 23.16% to 23.99%

Segment Margin Decreased for Plush and Plastic Figures

Plush Stuffed Toys Segment Breakdown

(In’000)	1H 2023	2H 2023	1H 2024
Revenue	1,239,913	1,487,878	1,186,083
Segment EBITDA	377,703	427,504	306,266
Segment Margin	30.17%	28.73%	25.82%

Plastic Figures Segment Breakdown

(In’000)	1H 2023	2H 2023	1H 2024
Revenue	1,007,115	1,216,890	936,337
Segment EBITDA	110,500	241,666	98,003
Segment Margin	10.97%	19.85%	10.47%

Dividend Maintained

It is rather tough to talk about this set of results as being bad. This is because gross margin actually is better. If it was worst off, it would have been easily a story of lower revenue lower margin lower economies of scale / pricing pressure.

But 1H 2024 was not the case. Automation was also mentioned so it seems to have left some optimism for 2H 2024.

Japan has recorded close to 20% drop in revenue and at the same time Plush Margins fell from 30% to 25%. My instant hunch is that the juicer margins definitely comes from Japan.

USA recorded around a fall of 18% in revenue. No surprises there as my estimate from Funko is around 16-20% based on its COGS / Inventory Additions.

2H 2024 has always been traditionally a stronger result for Dream (On Average 15 to 50% Revenue Increase compared to 1H depending on which year is being looked at). Therefore, i think it will be important to see how its partners are doing in 3Q 2024 and also cross-reference to some of the export statistics for Vietnam and reassess again. 

My current concerns will be the weakened Japan Revenue. Would have to see if I get any response from the IR.

There will be some level of waiting and patience needed. However if the automation and strong gross margins push through with the increased revenue in 2H 2024 compared to 2H 2023, there is always every chance to make up the 17% net profit shortfall.

If partner numbers show a double digit shortfall in 3Q 2024, it probably is time to consider exiting and reassess but until then, i think i am ok holding on for the time being.