Tuesday 9 April 2024

Portfolio Updates + Recent Thoughts (As of 9 April)

I just decided to post an update because there is a chance the returns might get lower as the year goes lol.

(Pretty and Cute)

Portfolio Returns as of 9 April 2024: 10.77%



The top 3 holdings of the portfolio remains largely the same trio. Dream, Huationg, San Miguel

San Miguel - Await May 1Q 2023 Results of its Parent Company San Mig Brewery. 

Currently, HK Beer Domestic Exports are up 14% in first 2 months of 2024 compared to 2023. Encouraging but March 2023 is a high export month so will have to continue to monitor as well.

As mentioned in my facebook post, the highlight of the annual report will be the rental amount is estimated to be higher in 2024 compared to 2023 and also a longer term rental lease is locked with the new anchor tenant.

Huationg - I have wrote up my view on the annual report in this facebook post. The highlight would be the refundable deposits being around 30% higher. This is usually a indicator for revenue moving forward as deposits are usually 2 months of rental. I hope i will be able to have time to attend the AGM.

Dream - I have mentioned in my previous post so i will not be talking much more about it. I will be attending the AGM and hopefully i will have more insights to share following the agm.


Recent Thoughts

HK Domestic Consumption 

In my recent trip to HK, it was a long weekend therefore a lot of Hk-ers were overseas. As such it seems pretty quiet and trains were less packed. I would say at least 60% of the people i see at restaurants / cafes / shops are mainland chinese.

The Harbour City was not packed on a Sunday Lunch Time. As such i am actually slightly worried about March Retail Sales and the whole tourism sector as a whole. It seems like the trend of HK-ers going China to buy cheap goods is growing while the reverse trend is not happening.

As such, F&B outlets, retail outlets, HK Reits are things that i was not keen on looking and after this trip i would still not be keen.

I am keen on EGL Holdings (HKEX: 6882)  A tour agency business in HK, but the gearing is too high making it scary and there are some financial loans from a related company as well.

Vietnam Consumption

From what i have seen, it seems like Vietnam consumption patterns have improved largely since Sept 2023.

(Positive Results Seen in Q1 2024)

(Affirmed by Bach Hoa Xanh (BHX), a Vietnam grocery operator, with 47% increase in revenue in first 2 months of 2024 vs 2023)


(Down 11% at December 2023)

(Down 16% YOY at Sept 2023)

1 way i try to assess how the economy is doing is to look at how Mobile World Investment Corp is doing.

It is a company that is Vietnam's No.1 multi-category retail platform by revenue and has different shops which sells mobile phones, electronics, groceries , medicines, kids products.

As such, looking at its revenue, it seems like domestic consumption has recovered.

This seems to echo the thoughts of Masan Group , another large conglomerate in Vietnam.

From its Earnings Release back in Jan 2024.

As such, a company that has re-entered the consideration list will be Golden Resources Development (Hkex: 677)

With convenient stores business in Vietnam, i wonder how much it will benefit from this recovery. 

Another company to consider is Luks Group (VN) (Hkex: 366) with its main business being cement production in Vietnam. Unfortunately, the property sector there is also undergoing downturn and the company's cement production is unprofitable in 2023. Looking at the Index of Industrial Production for Cement, the first 3 months of 2024 is still lower than 2023. This signals that a recovery is still some miles away.







Thursday 28 March 2024

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

 


March 2024 Returns: -2.93%

Year to Date Returns: -0.07%

Since Inception (9 Sept 2020) Returns: 74.21%

There is nothing much to report about with regards to March as companies already reported their results in February.

One thought that i had in mind was whether to shift Huationg Global out of the portfolio in this imaginary portfolio as well as my real portfolio.

Why sell out?
-Despite decent results, one of the major shareholders was disposing shares and as such it might have proved tough for the stock to record any capital gains

-On the other hand, dividends was conservative and somewhat not really ideal.

Why not sell out?
-Does not make sense to sell out of a stock that is <2 PE and has good cashflow and reduced debt

-Increase in refundable deposit might signal higher dormitory revenue moving forward

-Effort needed to replace the stock. As always, if there is something else that caught my eye then it would make the switch more attractive. Push/Pull.


With this thought parked somewhere at the back of my mind, i embarked on a trip to Korea in March. After returning, my mind is pretty much set on not selling for the time being.

So what happened in the trip to Korea?

I met a fan who is also from Singapore. It happened just so that we were both there to support the same group and i had a chit chat with him.

Turns out that he works in a foreign owned construction firm in Singapore and in the finance department.

We then had some chit-chat with regards to the construction sector the past years and in 2023/2024. 

I mentioned that dormitory prices have been increasing and asked if he was aware of it. 
Turns out that he does know the prices of the dormitories that his company has been paying and the terms. This instantly sparked my interest to know more and i also treated him a meal as well.


(Huationg Global Dormitory Revenue from its Results)

It is always good to hear from a view of a customer.

From my understanding, some of the dormitories that they are paying could easily go up to 660 per bed per month. This is of course dependent on where they stay etc. 
z
After typing for so long, the question would be ? does he know anything about Coastal Dormitory? Turns out he does.....so i was able to get the rate that his company is paying currently as well as when was the last time the price was changed and more information such as prices in the past year etc.

Unfortunately Coastal Dormitory is actually one of the 'cheapo' dormitories around. As you can see from the 2H 2023 results, price per bed is only 395 when beds can be going up to 600+. Due to its inaccessible location and being located far from many construction projects apart from the T5.

I will not be saying the price that they are paying as it is sensitive information (lol). But all i can say is that i expect 1H 2024 Revenue to be higher than 2H 2023.

Low Teens increase(from 2H 2023) in revenue is something that i would expect to see based on my understanding. However this is subjective because some folks might have renewed earlier while some later and as such rates can vary for everyone altogether as well.

So for now i will be staying put and holding my position (at least until the AGM is over, which i hope i would have time to attend)








Saturday 23 March 2024

(Results Released Thoughts) Dream International

Back in January, i released a preview of my thoughts on the results.

The concise portion was what i wrote below.

Concise Version

2023 Revenue Fall Compared to 2022 is likely, with any growth in profits to come from margin expansion / revenue growth in Plush Stuffed Toy.

Revenue from Top Customer in 2022 will fall in 2023. For 2023 revenue, Japan and China should see revenue growth while US it should see revenue decrease compared to 2022.

I am still optimistic that we will see profit growth for FY 2023 compared to FY 2022.

Safe to say. Everything is correct. 

(This image probably describes my mood/emotions after seeing the results)

What I like about the results

1) Since everything i mentioned is correct, then there is nothing to point out. But something incredible would be......its increase in cash position

The company started 2023 with 761 million HKD cash and current liabilities of 1126 million HKD.

At 30 June 2023, it has 845 million HKD cash and current liabilities of 1003 million HKD.

At 31 December 2023, it has 1390 million HKD Cash and current liabilities of 896 million HKD.

This to me is some remarkable cash generation year.

(At 31 December 2023)

(At 30 June 2023)


2) Adaptability of its production. With its top customer in 2022 cutting its orders and resulting in a revenue fall of close to 1 billion hkd or 50%....Dream was able to claw back in some ways and tap on Customer A and C which contributed a gain of close to 400 million.


As a whole, revenue still fell by around 900 million or around 15%. This was kind of expected looking at the export data as well as how the toy companies have done in 2023 amidst a bad retail environment of overstocking etc.

3) Margins. 




A question on the minds of many will be whether the margins are a fluke in 1H 2023. After all with plush stuffed toys 30.17% margin , many might think that it is a one-off. While margins in 2H 2023 did not improve, it still is remarkable at 28% as it is the highest 2H margins. 

The 17% margin for its plastic figures is also laudable considering revenue for 2H is one of the lowest since Covid Started.

Interestingly enough, utilisation rate for 2023 is 84% with lower labour cost compared to 2022 which has higher revenue, higher labour cost but utilisation rate of only 80%.

So that is some food for thought.

Overall, 26.83% Gross Margin for 2H 2023 is the highest since 2018, and also i believe the highest in its history.

How about 2024 then?

Well at current stage, we are only about 3 months in. From whatever data that i have seen across the board, it is relatively mixed. Which means i am pretty sure there is no positive profit alert coming for now.

Funko's revenue guidance for 2024 is actually similar to 2023. Therefore, it is rather unlikely that we will see any revenue growth from that end. Even if there is, it might not be significant.

Theme Park Demand ? . I guess we have to see the guidance given from Oriental Land in April before making a more informed decision.

Export Data for Jan and Feb seems muted, lower than 2023 by around 20% . Though to be fair, 2H 2023 Japan Export compared to 1H 2023 was 40% increase but revenue is only 9% for Dream. Therefore the indicator's accuracy leaves much to be questioned.

For Industrial Index of Production (Manufacture of games and toys) 2024's first 2 months is about 4.5% higher.

There is also Customer C, which increased its revenue contribution by 30%....

It really is still early days i feel. 

K-Pop Pictures Spamming Time.

(It really is anyone's guess at this point)

(10/10 Results)











Thursday 29 February 2024

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

 

February 2024 Returns: 3.51%

Year to Date Returns: 2.94%

Since Inception (9 Sept 2020) Returns: 79.47%

Main Companies that gave a positive return include UMS, Straco and Centurion

I believe the returns might look very different if i did the recording on 1st March as many companies reported result on 29 Feb itself.

Nevertheless. lets review the many companies that reported results

Straco - Perhaps the latest addition but i think the results is a big disappointment.

Q3 = 35m revenue and 16.3m profit
Q4 = 15m revenue and 2.9m profit.....

Moving forward, it puts some ? to how we should see and value this.

A company earning 12m per year vs a company earning 65m per year ....the range in between is too big. 

Score: 2/10

UMS - Always a stable dividend and results seem to be stable as well. With new factory operational in penang and expectation of uptick in order flow, nothing much to worry about as it has navigated poor semiconductor 2023 very well. Just have to see neighbor stocks *coughs* AEM to know.

Score: 5/10

Sutl Enterprise - Results Stable, Financial Position Improves. Have to see if 2024 is a year where overseas projects get traction. Locally, need to keep an eye on cost as expenses has increased more than revenue.

Score: 6/10

Haw Par - Big Thumbs Up from Me. I like the results very much. Revenue Increase from 148 million to 216 million

The increase in revenue of its healthcare goods is something very heartening to see.

1H 2022: Revenue 86.7m. Segment Profit 17.7m
2H 2022: Revenue 77.3m. Segment Profit 22.4m
1H 2023: Revenue 101.7m Segment Profit 29.1m
2H 2023: Revenue 111.7m Segment Profit 35.6m

Overall it remains a very deep value stock. In fact i think if it considers spinning the healthcare business it would look good. But the odds of such things are not high and it is not worth thinking much about. Full Year 40 cents Dividend is acceptable. Not Great but since the business has done well and shown good growth, there is nothing to worry about especially it is in very strong cash position.

Score: 9/10

Centurion - Stable. Not much Surprises. If core earnings can maintain or grow 10-20% would be great.

Score: 5/10

Huationg Global - This is actually tough for me to comment and give an honest take. Perhaps i talk about the negatives first. The same dividend amount is perhaps the most upset part of things.

The second most upset part of things will be the dormitory margins. In 1H 2023 , 8.8m segment profit
However, in full year it is 8m segment profit.

However if we were to include the 'Unallocated' expenses. 1H 2023 Segment Profit will be 3.862m while in 2H 2023 it will be 3.888m. Which looks like it remains stable despite slight revenue improvements.

3rdly, they moved backed the asset that was held for sale back to non-current assets again. Which indicate no near term intentions to sell the property again.

Moving on to the positives and maybes....... 73 million of Net Cash From Operating Activities. This is contributed by an increase of 27 million of trade and other payables. Could the additional refundable deposits indicate a higher rate moving forward?

1stly. Cash Position Improved from 23 million in 2022 to 70 million in 2023. Of course part of it is contract liabilities and part of it would be from the dormitory deposits. Nevertheless, this is a good improvement as the cash flow of the company has improved and if high payables is due to dormitory then it will be good.


2ndly. Improvements in Civil Engineering Contract Margins. 

This is coupled with an orderbook of 506.5 million. A huge increase from End of 2022 whereby it was 415 million. A slight increase from 30 June 2023 where it was 484.4 million.

Lastly. Overall Increase in Net Profit.

It is always good to see that profit before income has improved even after deducting other income.

Also, the lower loss allowance might signal a better business environment moving forward.

I would give this result.........7/10. Considering that the current PE is 1.83 and cash position improved with positive cash flow it deserves a decent score instead of a fail score. But i think there are a lot of questions to think and ponder about.






Wednesday 31 January 2024

Previewing Dream International FY 2023 (Revenue Fall is likely) (Deep Dive)

Disclaimer: This was meant to be published on 20 Jan but i think i have missed it.

If this post is published, it probably means that i had a good week(on 20 Jan) and decided to release my thoughts/predictions on the 2H and FY Results.  

(Had a good week)

For Folks who are curious on how the previous time it went, i wrote a similar preview for 1H 2023.

Concise Version

2023 Revenue Fall Compared to 2022 is likely, with any growth in profits to come from margin expansion / revenue growth in Plush Stuffed Toy.

Revenue from Top Customer in 2022 will fall in 2023. For 2023 revenue, Japan and China should see revenue growth while US it should see revenue decrease compared to 2022.

I am still optimistic that we will see profit growth for FY 2023 compared to FY 2022.


Long Version

Negative Factors affecting the company

Funko continues to show negative growth.

Funko, its main customer, continue its weak guidance that it has previously guided and this meant that we are going to see only slight improvements in Sales in 1H compared to 2H.

Funko recorded 491 million in revenue in 1H 2023. While 312 million is recorded in 3Q 2023, a guidance of full year 1065 million to 1105 million meant that 2H would come in at 574 million to 614 million.

A range of 16% to 25% growth compared to 1H 2023. But 2H 2022 was at 698 million revenue. Therefore this would represent a drop of 12 to 17% in revenue.

If we were to microscope it a bit further, Funko's inventory has been falling since 2022 and with a weaker revenue, i estimate it to be lower or at current levels. This implies lesser addition and would affect suppliers like Dream.

(Inventory fell from 246.4 m to 162.1m. Roughly 35% Fall)

Therefore I estimate a drop of 15% to 30% in revenue in 2H 2023 compared to 2H 2022 but an increase of likely 10-20% from 1H 2023 for Revenue from Funko

Toy Industry in US continue to see headwinds.


When news articles of such is being published, it possibly bodes an outlook that is not as rosy. As Dream does have Hasbro as one of its customers as well, it would definitely affect Dream's ability to make up for the shortfall from other customers.

Export Data for Vietnam

Looking at the 'Toys, games, and sports requisites' segment of exports for Vietnam,



We can see that export to US has fell in 2023 1H by 25%. Dream International's US Revenue similarly has fallen by a larger amount of 38%.


As such, i would probably think that 2023 2H Revenue to US would fall by around 20-30% as similar to my previous estimate.

The good news is that revenue to US in 2022 2H is already lower than 1H which means we are not exactly jumping off from a huge cliff but the difference will still be there.

Vietnam Industrial Production Index


Another possible indicator would be the industrial production. Interesting enough, Dream's Revenue seems to follow the YOY Increase / Decrease in the Index although the magnitude might be different.

As such, as 2023 2H is around 8% lower than 2022 2H, i would estimate revenue to be lower in 2H 2023 compared to 2H 2022.

A slightly brighter spot is that the figures in 2023 2H is higher than 2023 1H

Possible Bright Spots

Sustained Theme Park Demand

(Plush Stuffed Toys outperformance in 2023 1H Margins)


From my knowledge, Dream International does produce for Theme Parks under the Plush Stuffed Toys Segment


Which was one of the reasons i made the trip to Japan Disney to take a look at how many toys are actually produced in Vietnam. I also had to see for myself how the crowd and all is like as well.

(Seasonal Products I Believe)

In the theme park shops, there are definitely more Vietnam made products compared to in the Disney store i saw at Shibuya.

Regular Product

As Dream has mentioned that they normally receive orders 4-6 months before shipping date, i would say that the 'sustained demand' portion seems to hold some water.

To take a look at other parts to see if the 'sustained demand' analysis will hold, I took a look at merchandise revenue of Oriental Land.


July to September looks like decent figures for 'sustained demand' as revenue and inventory have largely remained at higher levels. Oriental Land also guided for higher visitorship from October 2023 to March 2024.


It is worth noting that although visitorship will be higher(12.5m from April 2023 to September 2023), the merchandise revenue is actually a lower guidance. Therefore, we would need to monitor to see if it is a conservative guidance or not. 

Also, recent unfortunate incidents such as earthquakes will always serve as a black swan event that might lower the turnout.

Exports Data to Japan in 2H Positive.


Positive for YOY and HOH. As such, I am still largely positive that Revenue from Dream to Japan might surprise on the upside as a result of this increase in export to Japan.

Cost Remains Acceptable

PVC Resin, ABS remain the major raw materials.


PVC Prices in 2022 2H ranged from 5.9k to 7.3k. The range was lower at 5.6k to 6.7k at 1H 2023, and continued to be rangebound of 6000.

As such, i believe margins should be decent, similar to 1H 2023 and better than 2H 2022 as cost is still slowly falling from a high level.



ABS Prices in 2023 compared to 2022, is definitely at a lower level. with price ranging from below 10k to not even 12k in 2023 as compared to 10.5k to 15k range in 2022.

As such, i don't expect negative surprises from cost as well.

Regional Export Data


(Export Figures of Regions in Vietnam where Dream Operate in.)
(Ha Nam is where the HQ and most paid-up capital is)

Not exactly a very influential indicator but Dream has most of its factories in Ha Nam. However, Ha Nam houses other big companies (Wistron Corp, Honda and Seoul Semicon Vina) as well therefore while this data is nice to have but might not be easy to have any correlations. 

Ha Nam Exports have increased since 2021 and in 2023 have hit record highs. 30% increase in exports value from 2H 2022 to 2H 2023.

Conclusion

Revenue from US is likely to be weak while revenue from Japan is likely to be stronger. However, the gain in revenue from Japan is unlikely to cover revenue from US.

As such, any profit improvements will come from margin expansion and i believe that should happen although the magnitude will depend.

With regards to demand from Shanghai Disneyland, that will be a factor in deciding profits as well. I believe 4Q might be a little weaker(5%-10% lower visitorship) than 3Q but should still remain at a good demand level. We might get some color when Disney releases its results.

Funko's revenue projection for 2024 in its earning release (usually in March) will also likely play a part in the analysis moving forward.

Currently, Dream is still hiring which is something positive as well.


This year would mark Dream's 40 Year Anniversary. 

Will we see something special like a special dividend? Although we need to take into account that the dividends of 20 cents in 1H 2023 is already double of 1H 2022 and it was 'To reward shareholders of the Company for their long-term support'



K-Pop Pictures Spamming Time










Post 20 Jan Updates

Vietnam Industrial Production for Manufacturing of Games and Toys is off to a decent start. Coming in at 48% higher than Jan 2023 and 11% higher than Feb 2023.

However, the preliminary export figures for the 1st 2 weeks seem to indicate a very weak opening of the year which means there needs to be more monitoring of the statistics.

February Figures for Exports / IIP unlikely to be of much reference as there will be a 'Tet'. Similar to CNY Break. It is expected to last around 10-12 days. (from 7 to 19 Feb if i remember correctly)

China Disneyland Shanghai Tourism in 2023, has broken 13 million visitorship. This is actually a record breaking year. At the end of the year, a new segment of the theme park called zootopia has opened as well.

(Zootopia Shanghai Disneyland Launch)

With regards to the Japan Disney Side

Sorry, i just realized Oriental Land has released their results up to 31 December 2023 on 30 January 2024.


26.3 million visitors is the forecasted target from April 2023 to March 2024. According to Oriental Land, 12.50 million visited from April 2023 to September 2023.

My estimate says 7.53 million visited from Octoboer 2023 to December 2023.

Therefore, to hit the target, 6.27 million will be required. January Figures look to be around 2 million. It might make sense that the forecast is not revised.

On the Inventory end. Inventory has fallen from 16523 m as of Sept 2023 to 12893 m in Dec 2023. 

(126427-77968 = 48459)

While inventory has fallen, Merchandise Revenue has increased to 48459 million. A big increase considering the previous quarters were 38334 million and 39364 million(23% increase).

Considering that cost of inventory for Merchandise is 42.3% in FY 2023, we can probably infer that  despite a fall in inventory, the revenue increase of 10000 million (which implies cost of sales around 4230 million) would mean that overall merchandise addition from Sept 2023 to Dec 2023 has remain stable despite the drop of inventory.

However, after thinking it through, it might not be as valuable of information as Toys and Sundries only make up 48% of merchandise revenue in FY 2023 and detailed COGS is not revealed while detailed revenue breakdown is shown. 

Based on my breakdown 1H 2023 Japan Revenue should have been stronger than 2H 2022 but that did not happen.

Therefore, a strong revenue in merchandise would be more important as it shows sustained demand and it might be too difficult to figure out if there has been 'more orders' as COGS is not revealed and we are also unsure which parts of the inventory has been reduced.

Of course, a rapid decrease in merchandise revenue and inventory would still be bad news. But fortunately, that is not the case for now.



With that i have come to the end of my analysis.