(Stocks Discussion) SGX: Aspen Holdings (SGX: 1F3)?

This catalist-listed Malaysian firm saw a surge in share price by nearly 71%, or 14.5 Singapore cents yesterday (24 Aug 2020) less than an hour after markets opened and that prompted SGX to query. It was the most heavily traded stock with some 87 million shares being traded.

The surge in share price was a record since its IPO in 2017. Aspen has attributed the unusual trading spike could be due to its announcement on 12 Aug 2020 regarding its plans to diversify the group’s businesses to include manufacturing and distribution of rubber gloves. The property group also accepted a binding letter of offer to lease a piece of industrial land from Kulim Technology Park Corp on the same day.

Will have to wait for the official announcement as to what led to this sudden surge after SGX is done with its query and investigation.

Business Profile

Aspen (Group) Holdings Limited operates as a holding company. The Company, through its subsidiaries, offers real estate services. Aspen (Group) Holdings owns and develops single family homes, residential complexes, shopping centers, resorts, fitness and financial centers, and resorts. Aspen (Group) Holdings serves customers in Malaysia and Singapore.

Income Statement

For 2018, their profitability seems to be neutral. It does seem that net profit margin is lying at the higher end of the "neutral" segment. The low D&A and interest expense has resulted in a Net Profit margin that is not far off from EBIT and EBITDA.

Their results had improved drastically from 2016 to 2017, however there was a sharp decrease in 2018. This decrease was in spite of revenue growth in 2018.

Balance Sheet

Overall, the balance sheet of the firm seems good. The firm's short-term liquidity seems more on the "neutral end", despite a good current ratio. This is probably due to more current assets being less liquid than receivables and inventory. Overtime, these ratios have improved, which are quite a healthy sign.

The firm also seems to have quite low debt levels, as evidenced by the various metrics. The only let down would be the operating cashflow/current liabilities portion which was negative, due to the weak cashflows. These metrics are definitely an improvement from 2016, but it had weakned in 2017 due to the weaker earnings and the taking on of more debt.

Cashflows

The firm does seem to have weak cashflows. This is due to the negative operating activities as well as free cashflows. However, cashflows had actually improved in 2018, although it is still severaly in the red. Because of such cashflows, the firm probably has not enough cash to pay out as dividends.

Efficiency Metrics

The firm's efficiency metrics look rather good though, although they are bothering on the lower end of this spectrum. However, they had become less efficient since 2017, as shown by how they had decreased over time. A deeper dive into the Du Pont Formual actually shows that the main dip in the ROE is due to the decrease in net profit over time, while Assets/Equity and Asset/Turnover seems to remain the same.

Valuation

Based on Price and EV multiples, the firm may be potentially undervalued. However, earnings growth was actually negative. Moreover, FCF and FCFE yield were both negative, which could be quite bad signs of value erosion.