Finally Keong Hong released their FY17 full year result. I was expecting that FY2017 full year result won't be good, as most of their projects are still at construction stage which won't generate huge profits except construction revenue. However, FY2017 net profit contributed to shareholders increased 84.7% yoy.
The company recorded a 50 million re-measurement gain of investment to fair value upon ceasing equity accounting. This is an one-off gain and is a non-cash transaction. Without the gain the company's net profit down from 33 million in FY2016 to 13.6 million in FY2017. However, when doing comparison of Keong Hong's result, we have to know that it involved in property development business, and the profit will be recorded at the end of the project under share of results of joint ventures / associates. The company recorded a 15 million profit under share of results of joint venture in FY2016, which was mainly contributed to share of profit from TOP of Skypark Residences in August 2016. In FY2017, the company recorded a share of loss of joint ventures and associates, as all the projects are not completed yet. Therefore we need to adjust the results when doing comparison. Revenue and gross profit from construction activities in FY2017 is similar to FY2016, which indicates that the flow of construction activities are pretty stable. As mentioned in the press release, construction order book stood at S$344.0 million, providing the
Group with a sustainable flow of activities through the end of financial year 2019. Currently the company is constructing two properties which will generate profit when they TOP.
The balance sheet looks quite healthy too. Cash and equivalent increased from 58 million to 77 million. The group also refinanced their non-current liability by issuing 85 million medium term notes with a 5.75% interest rate. The interest rate is slightly lower than their previous medium term notes. The company fully redeemed their series 1 medium term notes and repaid partial of the bank borrowings. Net asset value increased from 59.50 cents to 83.43 cents, which means that current share price is trading at big discount!
The board of directors declares a 1.75 cents of final dividend, so full year dividend is 2 cents, which is lower than previous years. However, I believed that the management is saving funds for further business expansion. As mentioned in the press release, "With the successful collective sales of 17 private residential estates year to date and the
redevelopment of these en bloc projects, the supply of private homes will more than double over
the next one to two years . We look forward to capitalising on this increased construction
demand for private residential homes." The company should be able to benefit from these activities.
I am looking forward to Keong Hong's annual report, which will show more details of its operation. I am also interested in the details of their 're-measurement'. I don't expect Maldives hotel will generate any profit in short term, as building reputation is a long term process. For now, I think that property construction and development will remain the major income source for the company in short to mid term.
Currently I am still holding 35,500 shares. Previously I sold 19,400 shares at 0.57 as I was planning to apply for RE&S IPO. Very sad thing is I got 0 shares and wasted 2 dollars. The IPO performed very good on first trading day. I bought back 16,500 shares at 0.555 last week. Heng, lucky I bought back part of the shares. I was planning to accumulate more after the result released, as I didn't expect a good result this year. That day I saw very few people selling the shares so I decided to buy some of the shares back as 0.555 is still a discount from its NAV.
After earning adjustment, I believed that Keong Hong is still trading at low price. I will accumulate more shares when the time and price is right. But I have no idea am I able to buy more at my average price anymore.
Thanks for reading. DYODD
Cheers.
No comments:
Post a Comment