Inphyy Corner

10 Facts You Need to Know about Thai Beverage’s 33% Drop In Profits

By Ser Jing Chong - February 28, 2014

The aptly-named Thailand-based beverage maker Thai Beverage (SGX: Y92) had released its full-year results for 2013 yesterday evening.

The company’s main market is in Thailand and it makes and sells beer, spirits, non-alcoholic beverages, and snacks.

The stock market here in Singapore seems to have given a big thumbs-up to the company’s results. As of the time of writing (28 Feb 2014, 2:25 pm), Thai Beverage’s shares are up 8.8% to S$0.555 even as the Straits Times Index (SGX: ^STI) is down by 0.1% to 3,093 points.

Here are 10 quick facts about the company’s earnings release for the 12 months ended 31 Dec 2013:

1. Revenue is down by 3% in 2013 from THB161 billion in 2012 to RHB156 billion mainly as a result of a decrease in sales from its beer and non-alcoholic beverage business. On the other hand, a slight increase in revenue from its spirits and food business had helped to mitigate the negative impacts.

2. Profits were down by 33% from THB28.5 billion to THB19.1 billion. The main reason for the drop in reported profits was due to a one-off gain of THB12.7 billion recorded in 2012 that’s related to the upward revision in the value of Fraser & Neave’s (SGX: F99) assets after Thai Beverage had acquired a 29% stake in F&N back in the third quarter of 2012.

3. Excluding the one-off gain of THB12.7 billion, Thai Beverage’s profits had actually grown by 18% in 2013 from THB16.1 billion to THB19.0 billion.

4. During the year, there was a reduction to 20% in the corporate income tax rate in Thailand from 23% in 2012. This could provide a tailwind for the company to improve its net profit margins going forward. The Thai government had lowered corporate taxes to “promote the competiveness on the global market” according to Thai Beverage.

5. Meanwhile, changes have been made to the alcohol excise tax in Thailand which came into effect from 4 Sep 2013 onwards. The important thing to know is that the changes have increased the excise tax rate for the company’s products.

6. Sales volume had decreased across the board for the company’s product lines except for the Oishi segment. The Sermsuk line of products saw the biggest drop in sales volume from 1,298 litres to 879 litres mainly because Sermsuk started launching new products of its own after terminating the sale of long-standing licensed brand products in Nov 2012.

7. Dollar sales for its four business segments were a mixture of growth and declines. The Spirits and Food segment both saw an increase in revenue for the year; the former’s sales went up 7.3% to THB93.2 billion while the latter’s improved by 12.4% to THB5.32 billion. Elsewhere, Beer and Non-alcoholic Beverages had shrinking revenue. Sales from the Beer segment dropped by 4.2% to THB34.4 billion with the Non-alcoholic Beverage segment (which contains the Sermsuk products) seeing a steep plunge of 40% in revenue to THB28.3 billion.

8. Thai Beverage’s balance sheet has improved a great deal compared to a year ago. For instance, its cash holdings had gone up from THB4.55 billion to THB5.10 billion even as its total borrowings had decreased from THB104.2 billion to THB67.7 billion.

9. The company’s balance sheet had managed to strengthen mainly due to a capital reduction in cash from Fraser & Neave which came up to THB33.3 billion. The cash received was used by Thai Beverage to pay off some of its loans, hence improving its balance sheet.

10. Annual dividends for 2013 come up to THB0.44 per share, up from THB0.42 in 2012. This translates into a trailing dividend yield of 3.1% at Thai Beverage’s current share price. In addition, Thai Beverage’s shares are currently valued at 18 times earnings.

Foolish Bottom Line

The decrease in sales volume in the company’s products bears some watching. The overall Thai economy had slowed down in 2013 (in addition to the ongoing political turmoil there), which would likely have negatively impacted on Thai Beverage’s business.

At the same time, the increase in excise taxes might mean an increase in prices of its products for which it’s unable to pass on to customers. Back in Thai Beverage’s third quarter earnings release for 2012, it mentioned that it had managed to “pass on the tax increase to its customers directly” when the Thai government had made changes to excise taxes back in 22 August 2012. Can it continue doing so?

A sustained trend (either upwards or downwards) in the sales volume of Thai Beverage’s products could perhaps give investors clues on how much pricing power its products actually have. And that’s something important for investors to think about.


Courtesy of The Motley Fool

Change In Centurion Corporation’s Strategy Pays Off

By James Yeo - March 1, 2014

Centurion Corporation Limited (SGX: OU8), formerly known as SM Summit Holdings Limited, is the only listed dormitory operator in Singapore via a RTO (reverse take-over) in 2011. It now manages dormitories under the Weslite brand in addition to have a storage disc manufacturing business.

The company released its results for the financial year ending 31 Dec 2013 on Friday and found itself achieving a strong financial performance for the year after its transformation into a dormitory operator.

As of the end of 2013, Centurion owns a total of 8 operational dormitories in Singapore and Malaysia. In Singapore, the company has three such assets in operation – one of which is a 45-55 joint venture with civil engineering outfit Lian Beng Group (SGX: L03) – with a total capacity of 19,700 beds. In Malaysia, it has five operational dormitories with have a total capacity of 13,500 beds.

There are four more dormitories in the planning stage by the company with one each in Singapore, and Australia, and two in Malaysia. Once these four dormitories are up and running, the company expects to grow its bed-capacity to more than 50,000 by 2015 after factoring in the completion of upgrading works on existing operational dormitories as well.

Some basic numbers

For the 12 months ended 31 Dec 2013, Centurion’s total revenue increased a slight 2% from S$65.2 million in 2012 to S$66.4 million in 2013. The meager increase is not actually a sign of the limitations in the company’s ability to increase revenue from its dormitory operations, however.

In fact, sales from the accommodation business surged 26% to S$47.3 million in 2013, propelled by the continued expansion of its accommodation assets in Malaysia as well as rental rate improvements in Singapore. Unfortunately, the strong growth from the lodging business was mitigated by the 31% fall in optical disc sales, stemming from weakening demand for optical media.

On a brighter note, the Group’s net profit skyrocketed 476% from S$15.99 million to a new high of S$92.2 million, mainly driven by fair value gains of S$77.2 million (i.e. an increase in the valuation of the company’s properties) derived from its investment properties. This more than offset a one-off impairment charge of S$3.9 million on hard assets related to its optical disc operations. Even without the fair value gains, profits from its accommodation business alone had advanced by a healthy annual growth rate of 43% to reach S$19.6 million.

In contrast, the strong performance from the accommodation business was dragged down by the optical disc segment which chalked up net losses of S$0.78 million as compared to a net profit of S$1.54 million in the previous year..

A growing top- and bottom-line is not the only thing that’s improving at Centurion Group; it is also seeing very healthy profit margins that’s improving. For instance, the company’s gross profit margin had gone up from 48% in 2012 to 52% in 2013 while its net profit margins had strengthened from 23.5% to 28.3%. This was mainly due to increased revenue contribution from the accommodation business which carries higher margins in general.

Financial Position

Centurion’s net assets rose 39% from S$211 million to S$292 million on a year-to-year basis. The increase was primarily attributable to the 68% surge in non-current assets. There were three primary reasons why that happened: 1) There was an acquisition of a plot of land in Woodlands, Singapore for S$81 million; 2) Upgrading works made on dormitories based in Malaysia and Toh Guan, Singapore, had increased the value of those properties by S$30 million, and; 3) the company’s investment properties had been revalued upwards by S$43 million.

However, any increase in the company’s assets was largely offset by a 152% jump in non-current liabilities to S$173 million.

Those liabilities had increased due to the issue of S$100 million worth of notes (i.e. debt) in Oct 2013 under Centurion Group’s Medium Term Note programme. In addition, the company had also increased its bank borrowings.

Ultimately, Centurion’s balance sheet had weakened compared to a year ago as its gearing ratio had increased from 26% at the end of 2012 to 39%.

Business Outlook

Looking ahead, Centurion is showing progress on 3 fronts.

Firstly, in the company’s accommodation business in Singapore, “rental rates are expected to remain sustainable with strong occupancy rates.” Upgrading works for its Westlite Toh Guan dormitory had been completed in Jan 2014, which saw the property add a new 18-storey block with 3,800 additional beds. Construction for the company’s Westlite Woodlands dormitory has also started and is expected to be done by 2015.

Secondly, Centurion has started building two new dormitories in Malaysia in Tampoi and Senai. The new facilities are expected to be done by 2015 and would contain 5,300 and 5,500 beds respectively.

Finally, Centurion has announced its foray into the student accommodation business through the acquisition of the RMIT Village in Melbourne, Australia. The company expects the acquisition to “be earnings accretive from Feb 2014” onwards.

Mr Kong Chee Min, chief executive of Centurion, has this to say regarding the company’s results: “Over the year, the Group has expanded our geographical footprint and diversified into the student accommodation business. We are pleased with the Group’s performance this year, which we believe sets the stage for us to bring our expertise and capabilities in the accommodation management business further out into Asia and beyond”.

Valuation

Shares of Centurion closed at S$0.62 on Friday. The company’s valued at a low price-to-earnings (P/E)ratio of 5.2 due to the high valuation gains on its properties. Excluding the fair value gains, Centurion’s profits would come in at 2.49 cents per share instead and its shares would then carry an adjusted P/E ratio of 24.9.

The company’s Board of Directors have proposed a final dividend of 0.6 Singapore cents per ordinary share in the earnings release. As there were no additional dividends declared for the year, this brings Centurion’s annual dividend for 2013 to 0.6 Singapore cents, a drop from the dividends of 0.7 Singapore cents paid out in 2012. In any case, this also translates into a trailing dividend yield of 1% for Centurion’s shares.


Courtesy of The Motley Fool

Singapore “Flyer” of the Week: BreadTalk Group Limited

By Sudhan P - March 15, 2014

Shares at the food & beverage company BreadTalk (SGX: 5DA) went up close to 7% on Thursday itself to rich its highest price since the end of May last year. In all, for the week, it flew 8%% to close at S$1.025 on Friday. For the uninitiated, Breadtalk was founded in Singapore in 2000 and it went public three years later.

Its brand portfolio comprises of BreadTalk, Toast Box, Food Republic, Din Tai Fung, The Icing Room, RamenPlay, Thye Moh Chan and Carl’s Jr. in China. It has operations in many parts of Asia and the Middle East.

On 25 Feb 2014, the company proudly announced that its revenue for the whole of 2013 crossed the half a billion dollar mark at $536.5 million. This was close to a 20% rise in revenue over the previous year. Meanwhile, its top-line growth also padded its bottom-line as net profit grew 13% year-on year to S$13.6 million, leading to a 13.4% increase in its fully diluted earnings per share to 4.82 Singapore cents.

Revenue improved across all of Breadtalk’s markets but it increased the most in China. Singapore continued to dominate in terms of revenue contribution but its performance was affected by the on-going labour shortage, rising rental costs and increased competition.

As of the end of last year, Breadtalk’s network (including franchised outlets) had a total of 836 outlets and this includes 737 bakery outlets, 58 food atriums and 41 restaurants. This was an expansion of 21.9% over the previous year.

The firm proposed a final dividend of 1.3 Singapore cents per ordinary share. Together with an interim dividend of 0.5 Singapore cents that’s already paid out, the total dividend declared for 2013 would be 1.8 Singapore cents. This translates to a dividend yield of 1.8% at its current price.

Going forward, Breadtalk will continue expanding in China, reinforce its position in Singapore and strengthen its operations in Thailand and Taiwan.

It is currently trading at 22 times its latest earnings.

Courtesy of The Motley Fool

Falling Knife of the Week: Linair Technologies Limited

By Sudhan P - March 15, 2014

This week’s Falling Knife is Linair Technologies Limited (SGX: 5FW), which has fallen 22.2% to close at S$0.028 for the week.

The firm provides one-stop environmental solutions and integrated services to the semiconductor, wastewater treatment, chemical, pharmaceutical and biotechnology industries, among others. Furthermore, Linair is a building services and engineering solutions provider specialising in the design, installation, testing and commissioning of Air-Conditioning and Mechanical Ventilation and Electrical Systems.

At the end of last month, the company released its full year results. It reported a revenue decline of 15.5% to S$28.7 million and a net loss of S$2.5 million. In the previous year, its losses were higher at S$2.6 million so Linair managed to do a tad better in 2013.

The slip in revenue was mainly attributed to the decrease in sales in the Singapore engineering segment, on the back of fewer projects secured and delays in projects.

Looking at the balance sheet, as of 31 Dec 2013, the company was in a net cash position of S$8.2 million. This figure breaks up into a cash balance of S$8.8 million and total borrowings worth S$0.66 million.

Despite not making a profit in 2013, the net cash generated from operations for the full year was at S$1.4 million. In the previous year, the firm used net cash from operations of S$2.7 million. The improvement was mainly because of a decrease in working capital needed.

Looking ahead, Linair expects the intense competition in its businesses to persist and will continue to be vigilant in managing costs. It will also seek ways to either grow organically or via acquisition.


Courtesy of The Motley Fool

Singapore “Flyer” of the Week: Noble Group Limited

By Sudhan P - March 28, 2014

This week’s Singapore “Flyer” sees one of the components of the Straits Times Index (SGX: ^STI) steal the limelight. Major commodities firm, Noble Group (SGX: N21), surged 13% for the week to close at S$1.205 on Thursday. Established in 1987 and operating in more than 140 locations, Noble is a global supply chain manager of agricultural and energy products, metals, and minerals.

On 27 March 2014, it was made public that two wholly-owned subsidiaries of Noble, Cavendish Mining UK Limited and Cavendish Mining Singapore Private Limited, have been established. The former, as the name suggests, is based in the United Kingdom while the latter is based in Singapore. Separately, on the same day, the firm announced that Next Champion International Limited and East Asset International Limited, both wholly-owned subsidiaries of Noble incorporated in Hong Kong, have been de-registered.

Three days earlier, the firm announced that it had syndicated and arranged a 364-day committed unsecured revolving loan of US$1.35 billion. It will use all amounts borrowed under the facility to refinance part of its existing debt and for its general corporate purposes.

Noble is currently trading at a historical price-to-earnings ratio of close to 30.

Courtesy of The Motley Fool

Falling Knife of the Week: Equation Corporation Limited

By Sudhan P - March 28, 2014

Equation Corporation (SGX: 532) is this week’s Falling Knife. Shares of the company tumbled by 23% since last Friday to close at S$0.01 on Thursday.

Equation Corporation is an investment holding company with business offerings such as electronic waste recycling services, energy auditing management and professional engineering consultancy services, sales and distribution of audio, video and other consumer electronics products, etc.

On 24 March 2014, the firm announced that SAC Capital Private Limited will be underwriting a rights issue that will take place as announced on 19 Feb 2014. An underwriter guarantees that the funds required by the company will be raised. SAC Capital has to subscribe for any shares offered but not taken up by shareholders.

Regarding the 19 Feb announcement, it was made public that Equation Corporation will be undertaking a renounceable, partially underwritten rights issue of around 1.169 billion new ordinary shares in the capital of the company. The issue price will be S$0.007 for each rights share, on the basis of one rights share for every four existing shares held by entitled shareholders.

The rationale for the rights issue is to “finance future business ventures relating to the [company’s] ordinary course of business through acquisitions and/or strategic joint ventures when such opportunities arise and for the [comnpany’s] general working capital”.

The firm is currently trading at a historical price-to-book ratio of 1.6.

Courtesy of The Motley Fool