First off , sorry for the delay as it is results crunch period.
There will be no changes to the portfolio made in this post. This is because a lot of results were reported after trading hours on 28 Feb and as such even if i were to made any changes , it would have been largely 'after reading results' based on 'before results trading price' which makes no actual sense.
As such if any changes will be made either this week or next week or end march.
February Gains mainly driven by: Samudera, Moneymax, Haw Par , Tat Seng, Far East Orchard, Choo Chiang and China Sunsine
Stocks that recorded a negative returns in February: Centurion , Wee Hur , UMS
I will just pick some stocks out and comment on their results.
Moneymax: Good results which is not really surprising as Gold prices increase and other pawn brokers have posted good results as well. The gain in share price in February reflects it as well.
Samudera Shipping: As previously mentioned, the 2H is better. As such, it moves into the observation list for now and will observe from the business update 1Q 2025 on how it has done for the rates.
Haw Par: New plant in Malaysia slightly affected gross margins. Not a concern in the long run. I think the valuation of this stock is dependent on how generous the management wants to be. As such, given that there is a special dividend this time, it is good news which has improved its valuations for the time being. Revenue of Healthcare Segment is still on an uptrend so that is encouraging.
Given higher dividends from UOB, stabilizing margins and ramping up of Msia Factory, 1H 2025 looks encouraging.
Centurion: All eyes on the reit spin-off for now. Apart from that, i think folks will be keen to know how the Johor Dorms might benefit from the Special Economic Zone.
Lastly the recent JVs into China and HK.....the amount invested will probably be crucial as well to assess if they will make a difference in terms of top and bottom line.
Wee Hur - I left this as the last as it probably is one of the toughest to talk about.
Its either i hold this till after the announcement regarding the 'special dividend' is announced which is supposed to be considered after the disposal is done or i would exit this in March.
The results don't look good as paper losses is made but the question i would ask myself in deciding whether to sell or buy is....
1) Was the bad results expected? What is the cause?
2) What is in for the company moving forward post disposal in terms of balance sheet and earnings wise?
3) Is the current price still attractive?
I have wrote my post results initial thoughts on my facebook page here.
Thats all for the reporting this month. I believe 1st week of March will be volatile as investors respond to the share price fluctuations.
Gonna paste some of my personal favourite K-POP Pictures and hope that they will bless me for the important March .
I wonder if the above image is the thoughts of some of the readers when they read that i was not going to answer any questions about Wee Hur. It is because answering Wee Hur will be really long . I will write it below if anyone is interested or wants more information after reading the facebook post.
So here we go...
Q1) Was the bad results expected? What is the cause?
Construction Segment recording a negative 9 million in segment profit for 2H 2024 vs 1 million in 1H 2024. This is definitely not expected given the expectation of a better construction environment.
16 million of other losses. Among the other losses, 7 million is from fall in AUD. Apart from that there is some impairment and fv losses as also seen in previous year.
28.7 million of fair value loss from investment properties. The company's investment properties consist of fair value + lease liabilities. Investment properties of 185m (11m from AUD Property Development Segment, 81m from Lease Liabilities, 40m Fair Value from Tuas South Dorm, 53m Fair Value from Pioneer Lodge Dorm)
How does the company record a profit in the worker dormitory segment?
Revenue +/- FV Loss - Lease Liabilities - operating cost = Segment Result
84,690 - 37,353 - operating cost = 31275 (2024)
Operating Cost is estimated to be 16062.
60% Ownership means profit of around 18 million is pretty good. Unfortunately corporate cost + construction segment loss is already 24 million. Add on Australia development loss of 10m...without the PBSA revaluation, the losses have been more than profit.
Folks have to be aware that FV Loss is accounting loss. The segment recorded a profit so cash flow is still positive actually and this means that on 1 hand investment properties drop in value but cash / trade receivables do increase.
That's why dividends can easily be increased. Not counting the PBSA Disposal, 101 million of cash +137m of receivables + 33m of financial assets is against 145m of payables + 134m bank borrowings. It is pretty close to 1:1 actually.
2) What is in for the company moving forward post disposal in terms of balance sheet and earnings wise?
Post Disposal the cash to borrowings payable ratio will definitely be more than 1:1. It will be around 1.93:1 if we estimate 270m of cash in the bank. The company can easily distribute up to 28 cents per share (current price of 47.5 cents) while still maintaing current capital structure.
Dorm Cash Flow is around 68 million for 2025 if revenue holds. 60% ownership is 40m.
Earnings will definitely sharply decline compared to 2024 due to lack of fair value PBSA revisions as a result of reduced stake. But still there should be some gains around (30m i reckon?) from the disposal
30% of the new dorm i reckon would bring in about 2m?
13% ownership of the PBSA i reckon it will bring in about 5m each year.
Total 7m.
New Dorm will partially operate , which will be a key decider in profits as dorm is the most profitable segment.
Can construction improve? Another qn to ponder.
3) Is the current price still attractive?
Attractive based on book value , financial health and realisable value but unattractive based on earnings as of current information
Book Value wise, over half of market cap is cash after the transaction. With easily 40m cash flow from dorm alone, they can distribute easily 4 cents this year, 5-6 cents in 2026 and if the leases are extended then it can continue on.
With possible increase in NAV if construction break evens.
If construction can break even or make a profit and the newer dorm gets into operation quicker, this will make the earnings be more attractive. If not then 2025 we will just get by with the gains made from the PBSA Disposal (around 3 cents) while waiting for 2026 which has the double dorm effect. Then any potential catalyst will be renewal of lease at favourable terms followed by 2027 when the lock in period of 13% stake has lapsed followed by the new pbsa in Adelaide being completed (currently planned for July 2027).
