My Portfolio – 2Q14 Post Findings and Views (Part 2)

Last week, I evaluated
companies within my portfolio for their result announcements the week before.
You can find the article here “
My Portfolio – 2Q14 Post Findings and
Similarly this week, I
will provide analysis of companies who announced their quarterly or half-yearly
results last week. Companies on microscope are Super Group, KSH Holdings, Overseas Education, Courts Asia and ComfortDelgro, where I had tabulated
results and Rolf’s views below. For KrisEnergy and ASX listed Coca Cola Amatil (announced result this week), I will only provide a brief review of their latest results for
reasons explained as you read on. Croesus RTr will announce financial results coming

In the consumer sector, Super Group and Courts Asia underperformed facing with cost pressures. Aside
from overheads, both Super and Courts also suffered slowdown in South East Asian
and Singapore markets respectively. Both companies have strong brand and long
track records. I am quite certain that the current sets of poor results will be
short-lived. Both companies’ share prices are at their all-time 52 weeks low,
which may present good buying opportunities.  

Coca Cola Amatil (CCL) is
throbbed by the slowdown and competitions in Australia market, but this is within
expectation. What is outside expectation is the dismal performance in
Indonesia, intensified by currency depreciation, cost of inflation and
competitions. Overall, EBITA fall 10%. Interim dividend also decline to A20c
(75% franked) from 24c last year. On a positive note, net debt declined by
A$34m to 1.9b. I am not too concern about CCL financial performance for now, instead
I am confident that CCL is currently undervalued and its iconic brand and track
records will see it through in the long run. This is also why I have not gone
into the details of the financial results.  
Construction and property based KSH Holdings also underachieved compared to a year ago, grieving
over the effect of sector slowdown. However I reckon that its strong project
wins and gradual diversification of business into property sectors both locally
and regionally, supported by strong balance sheet tide it over in the medium to
longer term.
Overseas Education reported
flattish top-line but declining bottom-line as a result of higher operating
expenses. It is expected that there will be higher expenses going forward. It
includes higher interest expenses from net proceeds received from the issuance
of bonds earlier as well as continual rise in operating cost. Good news being
its new and bigger campus construction is on schedule to be opened next year.
Despite aforementioned companies reported dismal results, one of
my favourites and larger holding – ComfortDelgro
provided some optimism. The company continues to grow both organically and
inorganically with encouraging top and bottom lines performances. What appears
inescapable too is the rising cost environment which erodes its margins. To me,
the future is bright for Comfort Delgro with growth potentials in Singapore
(DTL and Govt Contract Model for bus) and particularly in China where
urbanization and growing population will be the main drivers. I shall keep
vested as long as I could.  
KrisEnergy constitutes
less than 1% of my portfolio, therefore I shall not go into financial details. KrisEnergy
is an upstream Oil and Gas Exploration and Production (E&P) company. E&P
companies hold stakes in offshore producing assets with initial capital outlay
into exploration and development of oil wells. Once the oil wells is deemed suitable
for production, Rigs, FPSO and other offshore vessels will be chartered and deployed
for the drilling operation to extract the “first oil”. If wells start producing
oil, the company will become income-generative and returns will multiply. On
the contrary, any unsuccessful work to reach production stage may well mean that
capital expenditure going to drain. On a different note, Keppel is currently
the second largest shareholder in the company with a stake in excess of 30%.
Since my investment in the company is just pint-size, I am ready for this high
risk/ high return sector. Since KrisEnergy results announced, its share price
rose by ~4% to S$0.78.
FY Ending Jun 2014
• 2Q14 net profit down 58% to S$15.6m;
1H14 net profit down 43% to S$34.2m yoy. Drastic decrease also due to 2Q13
one off gain of S$17.1m from disposal of Sun Resources.
• 2Q14 Revenue down 5% to S$131.7m; 1H14
rev down 5% to S$256.3m (1H14) yoy.
• 2Q14 Op profit down 27% to S$17.5m
(2Q14); 1H14 Op profit down 22% to S$37.2m yoy.
• 2Q14 gross profit margin dipped 3% points
to 36% yoy, due to a higher composition of FI sales which carry a lower GPM
and higher raw material costs, particularly palm kernel oil cost which seen
rise of >60% yoy
• Healthy balance sheet with cash
position of S$77.7m
• Declared interim dividend of 1.0c
per share.
• Total dividend for the year at 7.0c
almost same as 7.1c last year.
Rolf’s Views
Solid balance sheet. FI growth potential. Stable dividend payout.
Significant dip of operating profits due to rising costs. Instability of core
market – Thailand.
Outlook: Lacklustre result may continue in the short term, mainly due to lower
Branded Consumer sales from slowdown in Southeast Asian markets worsen by unstable
political outlook and currency depreciation. However Food Ingredients sales
are still growing and account for higher percentage of total revenue i.e. 36%
of the total revenue in 2Q14.
1Q15 net profit down 18.0% to S$9.6m yoy.  
Revenue down 14.6% to S$62.5m yoy. Decrease in revenue mainly due to
slowness from construction business.
Cost of construction down by S$12.5m offset by personnel expenses
increased by S$1.5m. Construction cost down in line with revenue decline. Personnel
cost up mainly due to staff salary/bonuses increase.
• Strong balance sheet. Low gearing of 0.02x and strong
cash position of S$104.5m
Strong order book of >S$490m as at 31Jul14 for next two years.
Many New projects. S$147.8m public sector project.
of Prudential Tower with partners. Condo developments at Fernvale Road in SG.
Residential development in Brisbane with partners of A$150m with KSH holding 4.95%.
Rolf’s Views
Company diversification of business from construction to property. Further
regional diversification within property sector. Strong balance sheet and
order backlog.
Soft property outlook and increase labour/ material costs.
Outlook: Many
new projects. Still confident in the local property market on a longer term.   

• 2Q14 net profit
down 14% to $5.49m; 1H14, net profit down 4.3% to S$11.0m yoy.
• 2Q14 and 1H14,
revenue up 0.3m and 0.6m respectively. 1.2% improvement yoy
• Higher revenue
from increase in tuition fees offset by higher operating expenses.
• Property, plant and equipment rise to
S$75.3m from S$22.3m end Dec13. Cash position is S$201.1m up from S$124.7m.
• Both increases are due to the new school’s
capital expenditure and net proceeds from the issuance of bonds in Q214.
Rolf’s Views
New bigger campus on schedule to be opened Apr15.
Increasing staff costs. Future interest expenses from its bond issuance.
Outlook: Personnel costs and interest expense will continue to
increase. Confident that there will be tuition fees hike and expected higher
revenue from the expanded student base when the new campus starts.
• 2Q14 net profit
up 9.9% to S$75.7m yoy
• Revenue up
11.9% to S$1.02bn yoy.  Revenue rise contributed
by all business segments, notably buses and taxis. Bus segment reported
operating profit increase of S$9m.
• Operating
profit up lesser by 6.5% to S$119.9m yoy.
• This is due to
increase in staff costs, fuel & electricity, and premises costs.
• Operating
margins slipped slightly to 11.8%, from 12.4% a year ago. 
• Strong balance
sheet with net cash of S$48.1m and gross gearing of 24%
• An interim
dividend of 3.75 Scts was declared vs 1H13 of 3 Scts, equating to 57.6%
payout ratio.
• Recent
acquisition of Blue Mountain Bus Company from Sydney for A$26.5m (S$30.8m).
Rolf’s Views
Stable growth, increasing dividend payout, diverse revenue of which 50% is
outside Singapore. SBS starts to be more profitable.
Cost challenges and weakness in Australia transport segment. 
Short term will continue to face cost pressures offset by fare hike in April
this year for local market. Government contracting model will only come into
effect after End Aug 2016. ComfortDelgro expected to have an advantage supported
by experiences in overseas market.
In the long term, China has great growth potential due to
urbanisation and population growth. Singapore fare will continue to rise with
inflation. DTL MRT will add further revenue. 
Lesser private vehicles from higher COE also mean more business for
public transport.

 Courts Asia
• Q1 FY15 Net profit down 27.9% to S$5.1
million yoy
• Q1 FY15 Revenue down 1.5% to $194.1
million yoy
• Decrease net profits were mainly due to
lower Singapore store sales and increase in operating expenses of 14%. 
Strong cash position of
Rolf’s Views
Discounted PE/ PB. Strong brand and strong management. Growth potential in
Cost challenges. Continual reduction in Singapore store sales.
Outlook: Bleak outlook in the
short term with reduced earnings due to high cost, softer property outlook
and reduced rate of population growth. In the long term, positive about Indonesia
continual growth with Jakarta branch open by Sep this year. Mass furniture
demand in Singapore could also come in 2016 due to more HDB completed then.

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