Financial Result Review (2 cents Opinion)

Today, CDG Keong Hong and Tai Sin published their latest result.

CDG 1Q revenue up 1%, staff cost up 6.3%, total operating costs up 1.8%, and profit attributable to shareholder down 19.6% or 16.2 mil SGD. Without consider one-time gain from special dividend received last year, qoq profit down 6.2 mil SGD or 8.6%. Meanwhile SBS's quarter profit up 64%. The management gave neutral outlook to most of its business segments and gave positive outlook to its Singapore and Australia Public Transport Services business. Noted that the group purchased 200 taxi recently and mentioned that the demand is back. The result is not very good, but still acceptable. The company should be able to maintain its dividend payout. As Grab should slowly focus on how to make its business profitable instead of increase market share (as Uber quitted), they may reduce the promotion code and financial incentives to drivers and customers. I believe under current tax law car leasing fee is not a deductible expenses for income tax, so I anticipate that in a long run more drivers without a vehicle will go back to taxi companies. The business model and source of profit of Grab and CDG is very different.. So I believe in a long run both companies will find a way to share the market in the future. One thing I don't like about this report is the increase of staff cost. The report didn't explain the reason of it.. 

Keong Hong 1H revenue down 15%, gross profit down 8.4%, profit after tax down 2.1%, profit attributable to shareholder up 7.2% and total comprehensive income attributable to shareholder up 4.3%. Gross profit margin up from 17.4% to 18.7%. The group's revenue down was mainly due to lower recognition of revenue from construction of some current projects as they are about to complete. The group won a new contract to construct new National Skin Centre, and I believe the revenue and profit will be reflected in next report. The order book up from 344 mil in last quarter to 394 mil. The group set up a JV with some other companies to bid the land for condo development, but I am not sure about the result of the bid (news said they gave highest bid). Noted that the board increased the dividend to 0.5 cents compared to 0.25 cents last year, however two years ago the dividend was also 0.5 cents. Parc Life Executive Condominium has attained sales of approximately 95.0% to date (last report was 79%) and has obtained its TOP on 29 March 2018. Seaside Residences Condominium has achieved sales of 80.0% to date (last report was 65%), however I am not sure have they recognised the profit of these condos or not. The management also mentioned that Mercure Maldives Kooddoo Hotel has performed above our expectations since its opening in September 2017 and the management is cautiously optimistic on its performance in the current financial year. However we have to understand that even though the number of tourist visited Maldives is increasing every year, the number of available hotel room is increasing at a even faster rate, so the competition is quite strong. The hotel is managed by Mercure and their new hotel will be managed by Pullman which are under AccorHotel Groups (GIC invested in Accor recently). Accor Group is well known in European countries, which might attract those people to stay in these hotels. Although the group is facing many challenges, I would like to buy more shares if the price drops as the group is quite healthy to me.

Tai Sin 3Q revenue up 15.6%, COGS up 22.5%,  profit attributable to shareholders down 39.5% and total comprehensive income attributable to shareholders down 33.3%. Noted that the group's proceed of "short term borrowings" was 48.6 mil and repayment of "short term borrowings" was 35.5 mil, net cash flow from operating activities was 4.9 mil and net cash used in investing activities was 2.4 mil. So part of the proceed of "short term borrowings" was used to pay dividend, as the group paid 10.2 mil dividend within 9 months. The Group anticipates the business environment to remain challenging. The Group is facing pressure from the volatility of copper prices and foreign exchange coupled with the intense competition in the infrastructure sector which could impact the Group’s performance. The main focus of the Group is still on public sector infrastructure projects in the Southeast Asia region, despite uncertainties in realisation of the projects in the near term. With construction demand anticipated to improve over the medium term, there are still opportunities for the Group. The group also going to sell their stake in Nelyect international pte ltd. In the announcement the group mentioned that the share of the estimated profit after tax of NIPL resulting from the Disposal is about $3 million. From their FY2017 annual report, I found that the net profit of NIPL in FY2017 was 1.25 mil and loss 169,000 in FY2016. I think it might be a good deal if the group can generate cash and 3 mil profit by disposal, and the profit of the association is not so material in the group. However, I think the group is struggling in current business environment, and the risk of dividend reduction might be high, given that they only have 26.9 mil of cash at the moment, and they still need to use it as working capital... I might sell away my shares.. 

In conclusion, I think CDG result so so, Keong Hong one is quite ok, Tai Sin one is the worse. Just my 2 cents opinion.. so DYODD lah! 

Happy Investing.