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Isaac Chan
Isaac Chan, Business at NUS
Level 8. Wizard
Updated on 04 Dec 2019
Hey everyone! I'll list some thoughts I have here, mainly looking at some financials, business models and valuation for this stock. ! Business Profile Keppel Corporation is a Singapore-listed industrial conglomerate, with operations in property, offshore and marine, infrastructure and investments. This business should be a conglomerate, since the business operations seem diversified. For FY17, the revenue from the segments seem more or less equal, with property, offshore and marine having similar revenues and investments having the smallest. However, in FY18, revenue from Infrastructure is more significant. Financials ! ! Income Statement Although revenue for FY18 was more or less similar with FY17, operating profit of almost 20% due to lower D&A, staff costs and impairment loss on financial assets. Profit Before Tax was almost 3X higher because of the one-off financial penalty and related costs. This led to net profit being 5X higher. Balance Sheet Keppel seems to possess strong short-term liquidity with a current ratio of more than 3, but much of its current assets come from amounts due from subsidiaries. Keppel Corp seems quite leveraged, with a D/E ratio of 1.5X and a Debt/EBITDA ratio of almost 25X. Cashflow Statements A not so healthy sign is how working capital conditions had worsened, leading to Cashflow from Operating Activities becoming significantly lower. Improvements in cashflow from investing activities occured due to disposal of subsidiaries and associated companies. Lower cashflow from financing activities occured through lower issuance of debt and higher dividends being paid out. Risks ! Concentration Risk As mentioned earlier, I believe concentration risk across sectors can be considered diversified. However I feel that the majority of revenue still comes from Singapore, so there are significant risks associated with our economic conditions here, such as demand for infrastructure, government policies and regulation and Singapore market, as reflected by their 3Y monthly Beta of 1.48. Capital Intensive Business Much of Keppel's increase in cash balances can be attributed to their cashflows from investing activities. If you look at their breakdown, capital expenditures and investments in other entities seem to be a large part of Keppel's growth and acquisition strategy. Such significant cash outlay projections may be unsustainable, since Keppel's cashflow from operating activities have fluctuated. Working capital management thus are a big part of their operating strategy.
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Isaac Chan
Isaac Chan, Business at NUS
Level 8. Wizard
Updated on 04 Dec 2019
TL;DR : Personally, I don't think it's a good buy, looking at the financials on the surface, and considering that the F&B business is a very tough market both locally and abroad. Anyway, I have collated some pointers here that I picked up from other sources. Hope it helps! ! Source: TODAYonline Business Profile Most of us would recognise that the namesake bakery outlets but they also have got other businesses. They currently operate and franchise bakery/confectionary outlets, foodcourts and restaurants with 900 outlets over 17 countries. You could split their operations up into Bakery, Food Atrium and Restaurant. The bakery has almost 850 outlets, but almost 75% of them are run by franchisees. The Food Atrium segment operates under the chain of food courts under the name Food Republic, with 53 of them operating in SG and China. The restaurant segment operates 27 Din Tai Fung outlets in SG and Thailand. Financial figures used are for FY18 ! Profitability ! ! Source: BreadTalk Group Ltd Annual Report 2018 The overall profitability of BreadTalk Group is only 3.18%, quite low. Gross Margin is 56.2% while operating margin is 5.12%. The profit margin for the bakery segment is less than 1%, whereas the most profitable segment is actually the restaurant segment is around 20%. Since the bakery segment forms most of the revenue (almost 50%), this has resulted in the low profit margins. This actually shouldn't come as a surprise since prices charged for their bakery products need to be low to compete with other heartland bakeries. Moreover, the bakeries are usually positioned at mall locations with good frontage and high shopping traffic, which usually has very high rent too. For the restaurant segment, they can more easily differentiate themselves and charge more premium prices Balance Sheet Strength ! Source: BreadTalk Group Ltd Annual Report 2018 Compared to its peers, BreadTalk is quite highly leveraged. Based on the latest financials, their current and quick ratio fall below 1. It's capital structure is also made up mainly of debt, with debt being almost 1.5X of equity. It's debt mainly comprises of an equal proportion of short-term and long-term debt. Most of this debt had been taking on to finance overseas expansion, but a saving grace is that they have strong operating cashflows. Valuation ! Last Update: 23rd April BreadTalk's P/E ratio is currently near 32X. This higher P/E ratio could siginify investor's optimism that BreadTalk's ventures internationally would be positive. However, this valuation seems much higher than other players such as Kimly (13X), Koufu (16X), Jumbo (20X). Not sure if this high valuation for P/E is justified since BreadTalk has been experiencing some growth issues overseas. Personally, I do not think this valuation is justified since F&B market is quite tough overseas also, and value differentiation is still tough. As compared with other F&B businesses in Singapore, BreadTalk has the highest P/E and P/B ratio, and yet has the lowest dividend yield. This is quite an interesting phenomenon. Based on their financials, I do believe that other players such as Soup Restaurant and Japan Foods Holdings do have a lead on Breadtalk, as well as with Kimly and Koufu. This could be so because of the the weak profitability of the bakery segment. At a much higher P/E ratio, it seems that BreadTalk could be overvalued. Share Price Performance ! BreadTalk's last twelve month's performance reflected quite a huge dip since their peek in July, when earnings were released. I would say that most of such changes are due to the performances of their overseas outlet. I suspect that much of the valuation given were from expectations of overseas growth. Over the last 5 years, share prices did make a return of 17%, much better than the STI. With a 52-week high of $1.26, shares are trading at 65% of this high.
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Choon Yuan Chan
Choon Yuan Chan
Top Contributor

Top Contributor (Dec)

Level 9. God of Wisdom
Answered 1h ago
Agree with Ivan. OKH currently has three major industrial projects which it has built, completed and now experience difficulty in selling these units. In my view, OKH's auditor should have asked them to do an impairment review to determine if the current value of the unsold units in these3 projects are unjustified. In the past 3 years, industrial properties have been in a down trough and yet in the past 3 years, OKH global has not done an impairment on its industrial property units. It is a red flag to me and makes me question if there are lapses in the internal and external audit processes of OKH global.

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Stocks Discussion

Isaac Chan
Isaac Chan, Business at NUS
Level 8. Wizard
Answered on 15 Apr 2019
TL;DR Huge negative free cashflow due to poorer working capital conditions, high financing for acquisitions and capital expenditures. ! Business Profile City Development may not be a household name, but its reach into Singapore’s real estate ecosystem is massive. They are one of the pioneers of this sector, and is a property and hotel conglomerate involved in real estate development and investment, hotel ownership and management, and facility management. Financials ! Income Statement Revenue had increased YOY significantly to 4.2bn by 10.5%. There was a more than 50% decrease in operating YOY and coupled with higher tax expense, net profit for the year seemed to be almost the same. To me, this seems like a positive sign because normal operating activities had generated greater returns. despite higher tax expenses. Balance Sheet Significant YOY changes include a large increase of investment properties and financial assets, mainly due to the acquisition of subsidiaries. Current ratio is around 3, which shows that the business has a strong short-term liquidity position. Debt/Equity is a comfortable 0.5, which suggest that long term solvency and leverage seems appropriate. Cashflow Statement Cashflow from operating activities was negative mainly due to much worse off working capital management. The main driver of this was cash tied up in the development of properties and decreases in trade and other payables and contract liabilities. Cashflow from investing activities was almost 17 times higher due to a large proportion of cash used to acquire new subsidiaries. However, cashflow from financing activities turned a positive due to cash inflows of proceeds from their revolving credit facilities and bank borrowings. Overall, cashflow for the year was still negative. Free Cashflow for the year was almost 2bn due to a huge negative operating cashflow and high expenditure for subsidiaries, capital expenditures and joint ventures. Future Potential ! With the negative sentiment in property prices here and CDL holding the largest unsold inventory among developers, future prospects don’t look too good. It seems that growth overseas may be more positive, with office buildings in the UK and elsewhere helping to boost net income. However, here at home, depressed property prices and a lack of sentiment may cause future earnings here to decrease. Unsold inventory may also lead to inventory write downs, which may decrease balance sheet strength while incurring impairment losses which reduces net income. Potential for higher interest rates may also adversely affect the market, making the cost of borrowing even higher for more expensive purchases like property.
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Stocks Discussion

SGX

Jonathan Chia Guangrong
Jonathan Chia Guangrong, Fund Manager at JCG Fund
Level 8. Wizard
Answered on 19 Dec 2019
I am vested in this counter. Wanted to have some exposure to the Japanese market and the assets held are kinda unique here. Distribution returns are kinda fickle as its highly dependent on weather and number of players. This is reflected in the price movement as well. Thanks to some recent news about a possible acquisition, the price has moved up somewhat. Will wait and see what is going on before making further transactions.

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Stocks Discussion

Isaac Chan
Isaac Chan, Business at NUS
Level 8. Wizard
Updated on 11 Jun 2019
Business Profile ! Source: Next Insight Sino Grandness is an integrated manufacturer and distributor of own-branded juices as well as canned fruits and vegetables in China. They produce loquat fruit juice in China as well as export canned asparagus, long beans and mushrooms. The Group’s products are distributed globally across Europe, North America and in Asia, in renowned supermarkets, discount stores and convenience stores including as Lidl, Rewe, Carrefour, Walmart, Harpenden, Coles, Jusco and Metro. The production plants in China are strategically located in four provinces. Interestingly, the production bases straddle different climatic regions so that production activities can be carried throughout the year. ! Source: The Straits Times Forecasts and Estimates ! I forecasted that Sino Grandness will enjoy high growth in earnings over the next few years. This is supported by higher than industry average ROC historically but lowered to reflect more intense competition over the years. I grant that Sino Grandees will continue to have to some leeway in growing its revenue over the next few years as it had strong revenue growth previously. However as the company matures and the industry becomes more saturated, Sino Grandness will probably find it much tougher to retain customers and its competitive advantage. Leading to pricing pressures and high expenses. During the stable growth period, I project that Sino Grandness will reflect the growth of 1% revenue per year. I believe that this industry will continue to grow and expand, as the global population increases and the need for such staples increase. Sino Grandness just has to ensure that it grows with the industry. However, during the stable growth period, I predict that newer entrants into the market will erode ROC such that the ROC would equal the COC. I don't believe that Sino Grandness has a firm competitive advantage that helps to stave off competition, and thus their advantage over competitors might decrease over time. Hence, growth would not add value to the company's investors through time. The COC is on the lower end due to low cost of debt and high leverage. Cost of Equity is higher however due to the high levered Beta and risk premium from operating in China. Valuation ! Based on this simple DCF, it seems that the shares of the firm could be undervalued. This stock was also singled out by Motley Fool as one of the top few stocks to buy in June based on the Magic Formula.
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Stocks Discussion

Gabriel Tham
Gabriel Tham, Kenichi Tag Team Member at Tag Team
Level 9. God of Wisdom
Answered on 03 Jun 2019
It is hard to tell when is the best time to buy. If after you buy the stock price increase, you will be happy. If it drops after you buy, you will be sad. If you never buy and it goes up, you will regret. If you never buy and it drops, you say heng ah. This is the different emotional aspect of investing. You just need to commit and be confident with your choice. Re-evaluate the choice every one a while to ensure the company is doing good.

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Stocks Discussion

Yee Woon
Yee Woon
Level 6. Master
Answered 1h ago
These numbers are lagging and all the counters had moved before the number are annoucned. You should use it as an industry/market indicator to determine the direction. like choon yuan shared, you should be looking at index instead of indivdual companies if you are using these numbers as a guidance.

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Stocks Discussion

Yee Woon
Yee Woon
Level 6. Master
Answered 1h ago
Focus on the company growth and financial instead. The regulation are always an unknown and anything can happen. If the figures are strong, the company will grow naturally with or without external factors.

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Apple

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Stocks Discussion

Yee Woon
Yee Woon
Level 6. Master
Answered 1h ago
It is a good company but I will not buy in now. The company is cash rich and do not utilize their cash efficently. Until they formulated some plans to utilize their cash, I doubt that there will be major breakthrough/products/new revenues
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