TL;DR Year-On-Year, the financials of the firm seemed to have weaken over time. Given that the growth profile fo the firm isn't strong, I would be a lot more careful here.
Business Profile
Source: SK Jewllery
I don't think that the firm needs much explanation as regards to what they do. Interestingly, they also have stores in Malaysia, Thailand and China. In Singapore, they have over 60 retail stores. Other jewellery outlets include Soo Kee Jewellery and Love & Co, which provides different forms of jewellery offerings. It seemed that one of their growth strategies has been to expand into the overseas market to tap on a newer target audience.
Source: Francesa Tan
Income Statement
For 2018 itself, the firm's profitability seems quite weak, with quite low margins. Unfortunately, these margins have also eroded over time. The revenues and earnings of the firm have also weakened over the last few years. As a whole, this indicates that the income statement has become weaker.
Balance Sheet
The balance sheet of the firm seems quite healthy, however. Short-term liquidity is fine, except for the quick ratio, which is low due to the lack of receivables. With low debt levels relative to earnings and other assets, the firm seems fine about debt as well. Over time, these metrics have also gradually improved, which is a very positive sign.
Free Cashflow Analysis
The cashflows of the firm look quite weak. This is evidenced by the negative free cash flows. The negative free cashflows are a result of weak earnings but also high reinvestment rates. This, therefore, results in negative free cash flow to equity. Given that FCFE is negative, and a consistent amount of dividends was being paid out, this could mean that dividends might not be sustainable in the long run. As dividends have stayed constant, the payout ratio has also increased over time since net income dropped. All in all, this is not a very healthy sign.
Efficiency Metrics
The firm seems somewhat inefficient in its use of resources. The ROE is a result of high assets/equity ratio and not too bad asset turnover. However, the net profit margin is low. These metrics have also seemed to have worsened over time as well. Again, not a healthy sign. The firm also had a very high reinvestment rate. This might result in good growth in earnings in the next year. However, given that the reinvestment rate is so high, the growth in earnings ought to be more significant.
Valuation
Overall the shares of the firm seem to be trading at a cheaply. However, the companion variables are quite weak, which seems to justify the low multiples that the firms are trading at. The enterprise value multiples seem to be on the high end, but even then, their companion variables don't look good either.
Cost of Capital
The cost of debt is on the lower end due to the slightly higher interest coverage ratio of the firm. Although we do not have the 3Y monthly figures, even if we estimate a higher beta of 2, we would end up with a WACC just above 6%. The ROIC is still higher than the WACC in this case, although narrowly only.
TL;DR Year-On-Year, the financials of the firm seemed to have weaken over time. Given that the growth profile fo the firm isn't strong, I would be a lot more careful here.
Business Profile
Source: SK Jewllery
I don't think that the firm needs much explanation as regards to what they do. Interestingly, they also have stores in Malaysia, Thailand and China. In Singapore, they have over 60 retail stores. Other jewellery outlets include Soo Kee Jewellery and Love & Co, which provides different forms of jewellery offerings. It seemed that one of their growth strategies has been to expand into the overseas market to tap on a newer target audience.
Source: Francesa Tan
Income Statement
For 2018 itself, the firm's profitability seems quite weak, with quite low margins. Unfortunately, these margins have also eroded over time. The revenues and earnings of the firm have also weakened over the last few years. As a whole, this indicates that the income statement has become weaker.
Balance Sheet
The balance sheet of the firm seems quite healthy, however. Short-term liquidity is fine, except for the quick ratio, which is low due to the lack of receivables. With low debt levels relative to earnings and other assets, the firm seems fine about debt as well. Over time, these metrics have also gradually improved, which is a very positive sign.
Free Cashflow Analysis
The cashflows of the firm look quite weak. This is evidenced by the negative free cash flows. The negative free cashflows are a result of weak earnings but also high reinvestment rates. This, therefore, results in negative free cash flow to equity. Given that FCFE is negative, and a consistent amount of dividends was being paid out, this could mean that dividends might not be sustainable in the long run. As dividends have stayed constant, the payout ratio has also increased over time since net income dropped. All in all, this is not a very healthy sign.
Efficiency Metrics
The firm seems somewhat inefficient in its use of resources. The ROE is a result of high assets/equity ratio and not too bad asset turnover. However, the net profit margin is low. These metrics have also seemed to have worsened over time as well. Again, not a healthy sign. The firm also had a very high reinvestment rate. This might result in good growth in earnings in the next year. However, given that the reinvestment rate is so high, the growth in earnings ought to be more significant.
Valuation
Overall the shares of the firm seem to be trading at a cheaply. However, the companion variables are quite weak, which seems to justify the low multiples that the firms are trading at. The enterprise value multiples seem to be on the high end, but even then, their companion variables don't look good either.
Cost of Capital
The cost of debt is on the lower end due to the slightly higher interest coverage ratio of the firm. Although we do not have the 3Y monthly figures, even if we estimate a higher beta of 2, we would end up with a WACC just above 6%. The ROIC is still higher than the WACC in this case, although narrowly only.