27 May 2019
(Stocks Discussion) SGX: SP Corp (SGX: AWE)?
Discuss anything about SP Corp SGX: AWE share price, dividends, yield, ratios, fundamentals, technical analysis and if you would buy or sell on the SGX Singapore markets. Do take note that the answers given by our members are just your opinions, so please do your own due diligence before making an investment in SP Corp SGX: AWE
Source: SP Corp
SP Corporation Limited (Reg. no. 195200115K) is an industrial group listed on the Singapore Exchange Securities Trading Limited (SGX-ST). It principally engages in commodities trading activities. Their business segments can be into Tyre Distribution, Commodities Trading, Energy and Mining. It has a very small market cap and seemingly low trading activity for their shares.
For 2018, the profitability of the firm is quite weak. This is evidenced by the very low net profit margin of 1.4% only, and a gross profit margin of 2.36%. These margins seemed to have worsened since 2016, which is quite a bad sign. The overall revenue and earnings of the firm have also fluctuated since have also weakened over time too. This could show that the firm's income statement has over time.
The overall balance sheet of the firm is quite strong. This is a result of the high liquidity ratios and littl debt of the firm. The balance sheet seems to have also improved over time.
Free Cashflow Analysis
The free cash flow of the firm is quite bad, as shown by their negative free cash flows. As a result, the free cash flow to equity is quite weak too. These weak free cash flows are due to weak earnings as well as working capital requirements which exceeds earnings. These figures have also weakened year on year as well, which is quite a bad sign.
Due to the weak earnings, the overall efficiency of the firm is quite bad too. The low ROE can be attributed to weak earnings as well as weak assets/equity. The reinvestment percentage as we can see, is extremely high, which reduced earnings. However, earnings might improve by quite a bit if the ROIC can remain the following year.
The valuation of the firm seems quite low based on different multiples. However, when these multiples are compared to their companion variables, the shares may not be undervalued after all due to the firm's weak financials. FCF yield and FCFE yield look quite bad too. The Price/Current Assets - Liabilities ratio looks good however, which might provide some safety net for investors.
Cost of Capital
Unfortunately, ROIC is much lower than the cost of equity. This is a very bad sign as the shares are destroying much more value than what it costs.
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