Courts Asia – Mid Year Sale!

It’s been a busy month of May in work. It began with overseas colleagues visiting, followed by a new staff joining my team and ended with a tiring week of business trip
in China. I started writing this post last Saturday while at the airport and almost ended last night while on mid-air heading home.

Courts Asia at a glance

The busy schedule however could not stop me from hunting
down my 18th stock. I spotted Courts Asia sudden drop in price from S$0.575
to 0.51 (~13%) about 1.5 weeks ago. I decided
to pick up the “sale item” at S$0.52.

Courts Asia operates as an electrical, IT, and furniture
retailer in Southeast Asia. The company operates a total of 70 stores
comprising 13 stores in Singapore, 57 stores in Malaysia. It also operates ‘eCourts’,
an online sales platform; and provides warranty services. Courts is
entering Indonesia in
2014 by building our largest ever ‘Big-Box’ Megastore. Over the next 2 to 3
years, Courts plan to grow store footprint by an average of six stores a year
in Malaysia and an average of one store a year in Singapore.

1.5 weeks ago

Courts price of S$0.52 is more than 100% decline at
its peak of S$1.14 about a year ago. IPO price is S$0.77, and this is also the
price where shares were subscribed by the CEO and other top management. Courts
CEO and directors also initiated several share buyback activities since listing
consistently way above my purchase price, but were unable to support the decline. The
share buyback signifies the confidence of the management in the company and is
definitely positive sign for investors.

Personally, I like Courts strong brand and long history
since 1850, and still growing in this region. Its new Indonesia businesses will
also benefit from the potential growth of middle income group in the country going forward.

At S$0.52, PE is 7 which is steep
discount to the regional retailer, but roughly in line with similar credit
businesses in Malaysia. PB of 1 is a good bargain too. Courts also has a gross
credit book of > S$500m. While overall debts are high and operation cash
flow is negative, its operation profits had not fall in line.

On Fri (30 May),
Courts Asia announced unaudited group earnings results for the fourth quarter
and full year ended March 31, 2014. Now it probably explained why the decline
in share price 2 weeks ago due to the dismal results.

On a very
positive note, its share price had bounced back to S$0.58 as of yesterday.

For the 4Q,
  • The
    company reported sales of S$207m Vs S$189m a year ago.
    (Up 9.5%)
  • Pre-Tax Profit
    was S$11.8m against S$15,8m a year ago.
  • Net
    profit was S$7,8m (1.42 cents per diluted share) Vs S$12,6m (2.25 cents per
    diluted share) a year ago.
    (Dn 61.5%)
  • Net cash
    provided by operating activities was S$16.6m Vs S$5.8m a year ago.
For the FY ,
  • The
    company reported sales of S$830m Vs S$794m a year ago. (Up 4.6%)
  • Pre-tax Profit
    was S$38m Vs S$51m a year ago. (Dn 34.2%)
  • Net profit
    was S$28m (5.08c per diluted share) Vs S$41m (7.83c per diluted share) a year
    ago. (Dn 54%)
  • Net cash
    used in operating activities was S$7,6m Vs S$2,5m a year ago.
  • Additions
    to property, plant and equipment were S$18.5m Vs S$15.3m a year ago.
  • NAV per
    ordinary share as at March 31, 2014 was 53.8 cents Vs 51.7 cents a year ago.
  • Announced
    dividends of S$0.0076
     which is 1.31% to current price S$0.58 and 1.46% to my purchase
    price of S$0.52.
The mid-year Great Singapore Sale is nearing.

Happy shopping in Courts stores!

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