Business Profile
Source: Chip Eng Seng Annual Report 2018
Chip Eng Seng is one of Singapore’s leading homegrown property development and construction group. It has an impressive portfolio of quality residential developments, commercial properties, hospitality assets and, most recently, education-related investments to diversify into the Education business and augment the Group’s growth
through a steady and recurring revenue stream. One of their most prominent projects that Singaporeans can identify with is Pinnacle@Duxton.
Source: Chip Eng Seng Annual Report 2018
SWOT
Strength: One of the more positive signs of the business is how earnings and revenue have been growing consistently over the past few years. They have also received numerous awards and recognition which lends it an edge over their peers in tendering for projects and differentiating themselves from the competition.
Weakness: The business is very working capital intensive where the business reported negative cash flow from operating activities of -98.4mn. Projects also have a long gestation period, signified by high contract assets which reduces working capital cash flows.
Source: Chip Eng Seng Annual Report 2018
Opportunities: The group has also built up a sizeable hotel and commercial portfolio. The hotel provides stable recurring cash flow to the group, the substantial value could be unlocked, given the robust demand for hotel assets in Singapore.
Threats: Weaker demand for private residential property across CES’s key markets of Singapore and Australia could impact the success of its future launches significantly. Moreover, recent property cooling measures by the government have slowed down land purchases.
Financials
Income Statement
The group has been growing steadily in revenue over the past few years, which is quite a positive sign. For such a capital intensive business, I believe that their income statement looks fairly profitable as well.
As can be seen, the bulk of revenue originates from property developments followed by construction. Most of the revenue had also originated from Singapore, but thankfully, this had reduced in 2018.
Balance Sheet
The company looks like it has strong short-term liquidity but seems to have quite a huge amount of debt. Short-term liquidity looks good with very high current, quick and cash ratio. The company's more significant debt position is characterised by a slightly higher Net Debt/Equity ratio, but also with Net Debt/EBIT and EBIT/Interest Expense.
Operating Margins
The company's relatively low operating profitability is due to their high need for capital and a large asset base. This is characteristic of the business model they are operating in, which is very capital intensive and requires long gestation periods.
Cashflows
Despite strong earnings, the company does not have strong cash flows, where the company's cashflows had to buffered by external financing from debt and equity. The weak cash flows were due to an increase in receivables, acquisition of business assets, subsidiaries and plant, property and equipment. Despite negative cash flows, the company still paid out dividends, which could suggest that such dividends aren't very sustainable.
Business Profile
Source: Chip Eng Seng Annual Report 2018
Chip Eng Seng is one of Singapore’s leading homegrown property development and construction group. It has an impressive portfolio of quality residential developments, commercial properties, hospitality assets and, most recently, education-related investments to diversify into the Education business and augment the Group’s growth
through a steady and recurring revenue stream. One of their most prominent projects that Singaporeans can identify with is Pinnacle@Duxton.
Source: Chip Eng Seng Annual Report 2018
SWOT
Strength: One of the more positive signs of the business is how earnings and revenue have been growing consistently over the past few years. They have also received numerous awards and recognition which lends it an edge over their peers in tendering for projects and differentiating themselves from the competition.
Weakness: The business is very working capital intensive where the business reported negative cash flow from operating activities of -98.4mn. Projects also have a long gestation period, signified by high contract assets which reduces working capital cash flows.
Source: Chip Eng Seng Annual Report 2018
Opportunities: The group has also built up a sizeable hotel and commercial portfolio. The hotel provides stable recurring cash flow to the group, the substantial value could be unlocked, given the robust demand for hotel assets in Singapore.
Threats: Weaker demand for private residential property across CES’s key markets of Singapore and Australia could impact the success of its future launches significantly. Moreover, recent property cooling measures by the government have slowed down land purchases.
Financials
Income Statement
The group has been growing steadily in revenue over the past few years, which is quite a positive sign. For such a capital intensive business, I believe that their income statement looks fairly profitable as well.
As can be seen, the bulk of revenue originates from property developments followed by construction. Most of the revenue had also originated from Singapore, but thankfully, this had reduced in 2018.
Balance Sheet
The company looks like it has strong short-term liquidity but seems to have quite a huge amount of debt. Short-term liquidity looks good with very high current, quick and cash ratio. The company's more significant debt position is characterised by a slightly higher Net Debt/Equity ratio, but also with Net Debt/EBIT and EBIT/Interest Expense.
Operating Margins
The company's relatively low operating profitability is due to their high need for capital and a large asset base. This is characteristic of the business model they are operating in, which is very capital intensive and requires long gestation periods.
Cashflows
Despite strong earnings, the company does not have strong cash flows, where the company's cashflows had to buffered by external financing from debt and equity. The weak cash flows were due to an increase in receivables, acquisition of business assets, subsidiaries and plant, property and equipment. Despite negative cash flows, the company still paid out dividends, which could suggest that such dividends aren't very sustainable.