Coaching Session 8 Mar 2017
AGENDA 1. 2. 3. 4.
Top 10 Blue Chip Stock Stockss To To Watc Watch h In 2017 Case St Study – Challenger Technologies Port rtfo foli lio o Revie iew w CNA CN AV and and GP GPAD AD Op Oppo portun rtunit itie iess
Banks
Banks
Banks
Banks
Banks Ratio
DBS
OCBC
UOB
PB
1.12
1.11
0.6455
PE
11.412
11.555
18.277
Dividend Yield
3.18%
3.82%
2.30%
Net Profit Margin
36.56%
40.22%
19.92%
Quality of Earning
2.247
NA
1.876
Debt/Equity
N.M.
N.M.
N.M.
Interest Coverage Ratio
N.M.
N.M.
N.M.
Banks
Banks
Price as of 3rd March 2017
Property & Construction Ratio
Capitaland
CDL
UOL
PB
0.8689
0.9556
0.6455
PE
12.851
13.377
18.277
Dividend Yield
2.77%
0.849%
2.30%
Net Profit Margin
22.66%
16.395%
19.92%
Quality of Earning
2.777
1.844
1.876
57.10%
22.90%
25.20%
5.099
8.041
11.88
Debt/Equity Interest Coverage Ratio
Property & Construction Past 1 year Price Chart
Property & Construction Business Model
Property & Construction Earning Trend
Property & Construction Future Development
Property & Construction Relative Valuation Historical PE Ratio
Historical PB ratio
Current 12.851
Current 0.8689
Offshore & Marine Ratio
Keppel Corp
Sembcorp Ind
YZJ Ship Building
PB
1.1195
0.9802
0.8114
PE
16.650
16.247
10.508
Dividend Yield
2.78%
2.47%
4.00%
Net Profit Margin
11.58%
4.50%
11.61%
Quality of Earning
0.421
2.45
2.33
56.50%
122%
Net Cash
4.700
2.261
10.911
Debt/Equity Interest Coverage Ratio
Offshore & Marine Past 1 year Price Chart
Offshore & Marine Earning Trend
Offshore & Marine Future Development
• Declining order book , only secured $500m contract in
2016 • Closing 3 Singapore yards in 2017 • Reduce dividend , 3.0% base on $6.64 • Recurring income contributed 42% of the group’s total net
profit for the year • Focusing on growing stable and recurring income to ride out down cycles
Offshore & Marine Relative Valuation Historical Dividend Yield
Historical PB ratio
Current 5.82%
Current 0.8758
Offshore & Marine Past 1 year Price Chart
Offshore & Marine Business Model
Offshore & Marine Earning Trend
Offshore & Marine Earning Trend
Offshore & Marine Future Development
Offshore & Marine Relative Valuation Historical PE ratio
Historical PB ratio
Current 10.508
Current 0.8114
Commercial REIT Ratio
CapitaCom Trust
Suntec REIT
Keppel REIT
PB
0.8758
0.8012
0.7166
PE
17.739
17.77
13.596
Dividend Yield
5.82%
5.82%
6.16%
Net Profit Margin
87.29%
75.03%
155.16%
Quality of Earning
0.779
0.802
0.432
46.80%
57.10%
46.40%
6.152
3.504
4.929
Debt/Equity Interest Coverage Ratio
Commercial REIT Past 1 year Price Chart
Commercial REIT Business Model
Commercial REIT Earning Trend
Commercial REIT Future Development
Commercial REIT Relative Valuation Historical Dividend Yield
Historical PB ratio
Current 5.82%
Current 0.8758
Commercial REIT Past 1 year Price Chart
Commercial REIT Business Model
Commercial REIT Earning Trend
Commercial REIT Future Development
Commercial REIT Future Development
Commercial REIT Relative Valuation Historical Dividend Yield
Historical PB ratio
Current 6.16%
Current 0.7166
SATS Past 1 year Price Chart
SATS Business Model
SATS Earning Trend
SATS Future Development
• Expected increase in volume at Changi Airport • Accelerate the harnessing of technology to improve productivity, seek new opportunities beyond Singapore
and develop new ventures outside aviation
SATS Relative Valuation Historical PE ratio
Historical PB ratio
Current 25.26
Current 3.61
Q&M Past 1 year Price Chart
Q&M Business Model
Q&M Earning Trend
Q&M Future Development
• On going expansion through acquisition in Singapore,
China and Malaysia • Proposed spin-off of subsidiary on the Catalist Board of SGX • Conducting a strategic review of its business, and has appointed Religare Capital Markets Corporate Finance to help with the task. The group said that the independent review of options available for its business is in line with its commitment to enhance shareholder value.
Q&M Relative Valuation Historical PE ratio
Historical PB ratio
Current 19.84
Current 4.90
ST Engineering Past 1 year Price Chart
ST Engineering Business Model
ST Engineering Earning Trend
ST Engineering Future Development
• Expected all sectors to be comparable or higher than FY
2016 other than Marine Sector • $11.6b order book; about $3.7b to be delivered in FY2017 (end 2015: $11.7b)
ST Engineering Relative Valuation Historical PE ratio
Historical PB ratio
Current 19.84
Current 4.90
Q&A
[email protected]
CASE STUDY Challenger (SGX:573)
Outline of Analysis • Answer two questions: –Is the dividend sustainable? • Balance sheet strength
–Is there an opportunity for growth? If so, what
are there?
• What is the risk? • Conclusion / others
Consistency and Sustainability
Stock Metrics • • • • • • • •
Gross Profitability Ratio: 43% Dividend Yield: 5.5% Mkt Cap. $166 M P/B 2 P/E 9 +++ Debt to Equity 46% Payout ratio 0.5
Operating Segments - IT products and services
25 Superstores, 16 mini stores and 1 select stores
Operating Segments - Electronic signage services • supply and installation of electronic signages
and provision of electronic signage services.
Operating Segments - Telephonic call centre and data management services • telephonic call centre, data management
services and direct marketing services
Operating Segments Performance
2 Key GPAD Metrics 1.
Gross Profitability Ratio
– Gross profit / total assets
2.
Dividend Yield
Gross Profitability Ratio = Gross Profits / Total Assets $'000
Dec-15
Dec-14
Dec-13
Dec-12
Dec-11
Gross Profit
45,440
45,475
43,623
39,077
37,770
Total Assets
111,639
115,222
109,942
90,261
95,876
40%
39%
39%
43%
39%
GPA
Total Assets [$42M] Interest earning balances ranged between 0.30% and 1.65%
[$38M] I.T products [$8.7M] Investment in technology companies and bonds
Dividends vs Free Cash Flow vs Earnings
Cash and Dividends payout $'000 Cash and cash equivalents Dividends
Dec-12
Dec-13
Dec-14
42,094
42,946
52,621
7,940
8,630
8,630
Dec-15
Dec-16
41,653
52,273
9,148
9,3201
Growth Potential ASEAN Retail Sector – SGX & Frost & Sullivan
Growth Potential
Online retail / Total Retail Sales
Growth in E-commerce sales
Projected Growth in ASEAN Retail - SGX
Growth Prospect – Hachi.Tech • Launched in
April 2016.
• Complementry
with their network of physical retail stores in Singapore.
• Expend beyond
I.T gadgets
Growth Prospect – Hachi.Tech "We are looking to cross the 50 per cent mark from online sales revenue within five years. The company aims to generate a cumulative S$500 million from online over the next five years. “ – BT 2016
Competitors
Competitors • “Amazon plans to enter Southeast Asia
with Singapore launch in Q1 2017” -TechCrunch
Challenger Strategies •
Challeng e Ventures Challenge Ventures – Investment arm investing in digital platforms complementary to Challenger Technologies’ core businesses. – Hachi.sg – lifestyle I.T gadgets online marketplace Andi dios os Pt Pte e Lt Ltd – Smartphone online – An marketplace inCall all Syst ystems ems - Ma Mark rketi eting ng sol soluti utions ons – inC
•
Challenger’s ValueClub (half a million members) – leverage on existing loyal customers base
Loo Leong Thye Free ee float float only only 21%. 21%. Loo Leong Leong Thye Thye is the the • Fr founder and CEO who owns 54.01% 01% holdi holding ng (inc dee deemed med inte intere rest) st) • 54. • $1.15 M pay
Risks & Conclusion • Unlikely to be a dominant player in the online E-
commence space for Hachi.Tech. – Physical store will still be a dominant source of
revenue
• Susceptible to retail market as they do not own
their store i.e the closure of Challenger’s superstore at Funan in Jun 2016 (appx. 20% revenue loss) is a good example. • Low free float of 21% • Strong balance sheet and cash based business to sustain dividends payout (5% div. Yield)
CNAV and GPAD Updates
GP Hotels (SGX:P9J) • Voluntary cash offer at $0.365 by JK Global
Capital Pte. Ltd • Condition:
– Not less than 90 per cent – May revise to more than 50 per cent
• Rationale: – – – – –
14.1% premium to prevailing share price Low trading activity Unlikely to raise capital with rights issue Cost of listing Management flexibility as a private company
GP Hotels (SGX:P9J) • Owns and operates Fragrance Hotel and
Parc Sovereign • Has been aggressively buying Australian land • Plans to build the tallest hotel in Perth (249.5 meters with 62 levels complete in 2020) • Sister company, Fragrance, is also buying and developing properties aggressively
GP Hotels (SGX:P9J) • Dr Koh Wee Meng • #26 richest man in • • • •
Singapore with $1.09 Billion Latest ownership level as of 3 Mar 2017 is 73.13% Book Value = $0.69 Offer = $0.365 47% discount!
Kingboard Copper (SGX:K14) • Unconditional cash offer $0.40 • NAV per share $0.68 • Intention to delist • Sold because of EY’s report which we
prefer to err on the safe side of potential charges on violating exchange rules or Act – Made 24% instead of 112% gain
Kingboard Copper (SGX:K14) Trading above offer price of $0.40
Avi-Tech (SGX:BKY) • Burn-in chips (stress test chips to weed out
those which will fail) -> High reliability • Growth drivers -> automotive, cloud • Founder is CEO and his son is the COO
Avi-Tech (SGX:BKY) $10m. Desktop valuation done was $23m. (NAV to increase to to $0.33) ~130,000 sqft
Avi-Tech (SGX:BKY) MapleTree Industrial Trust
Avi-Tech (SGX:BKY)
New Watchlist
Esthetics Int (BURSA:5081)
Esthetics Int (BURSA:5081)
Esthetics Int (BURSA:5081)
Esthetics Int (BURSA:5081) • Main assets in properties
and cash (2.4% div yield) • Top 3 properties – Paya Lebar Square #09-27 to
#09-31 (RM37m) – HQ at Shah Alam, Selangor (RM26m) – 22 Hung To Road, Kwun Tong, Kowloon, Hong Kong (RM20m)
Esthetics Int (BURSA:5081)
Executive Chairman CEO ED
Man Yue Tech (HKSE:894)
Man Yue Tech (HKSE:894) • Produce capacitors • Falling revenues and losses • Positive change – production
of the ESS products for green energy
Man Yue Tech (HKSE:894) • Diverse assets 90-150 days credit. No concentrated customers and have credit risk insurance
Land & building for own use and investment properties
Capacitors & raw materials
Plant & Equipment
Man Yue Tech (HKSE:894) • Chairlady Kee Chor Lin co-founded with
her late husband, Chan Ho Sing • Their son, Chan Yu Ching, Eugene, is the current MD • Family owns 56%
GPAD Quintile Range G Rank
GPA
D Rank
Div Yield
G5
more than 22.3%
D5
more than 3.9%
G4
10.6% – 22.3%
D4
2.0% – 3.9%
G3
5.5% -10.5%
D3
0.0% – 1.9%
G2
1.9% – 5.4%
D2
0.0%
G1
less than 1.9%
D1
0.0% As of 28 Feb 2017
Gross Profits Calculation INCOME STATEMENT Revenue - Cost of Goods Sold = Gross Profit Not all companies report COGS and Gross Profits Financial data providers have different calculations
Cost of Goods exclude Depreciation
Cost of Goods include Depreciation
TalkMed 1 for 1 Bonus shares without capitalisation of retained earnings Revenue up 2%, earnings up 5% Dividend yield 3% (share price of $1.49)
QAF I eat this every day
Declined 10% in a day
Possible reason due to the sale of its 20% shareholding interest in Gardenia Bakeries (KL) Sdn Bhd (‘GBKL’) to comply with the Malaysian governmental regulatory condition. Revenue declined and a one-off gain.
Tat Seng Packaging (SGX:T12) Price jumped up +10% before we could invest Correlated event is the additional 1c dividends declared
Tat Seng Packaging (SGX:T12)
Tat Seng Packaging (SGX:T12) SALES Singapore
China
16%
84%
Tat Seng Packaging (SGX:T12) • Hanwell (SGX:DM0) has
63.95% stake (acquired in 2005) – Formerly known as PSC
• Dr Allan Yap is Executive
Chairman of both Tat Seng and Hanwell – Board comprises similar
directors
• Tat Seng contributed more
than half of Hanwell’s revenue
Tat Seng Packaging (SGX:T12) Hanwell’s substantial shareholders
Executive Chairman Di Yi Jia founder
CSE Global (SGX:544)
CSE Global (SGX:544)
CSE Global (SGX:544) • Latest 31 Dec 2016 results • GPA = 30% • Div = 2.75c (same as 2015) ~5.5% yield • Strong results despite weak segment
CSE Global (SGX:544)
CSE Global (SGX:544)
Deputy chairman
Fund managers Fidelity Funds Free float = 63%
TTJ (SGX:K1Q) (SGX:K1Q)
TTJ (SGX:K1Q) (SGX:K1Q)
TTJ (SGX:K1Q) • Leading steel structure provider and
started dormitory business
TTJ (SGX:K1Q) • Past projects
TTJ (SGX:K1Q) Potential Projects
• Transportation projects – Thomson-East Coast MRT Line and Changi Depot, Cross Island MRT Line, Jurong Region MRT Line, Eastern Region MRT Line and the Singapore-KL high speed rail • Infrastructure projects – water reclamation and sewerage projects under the Public Utilities Board; – Furniture Hub at Sungei Kadut, Multi-User Industrial Development at Defu South, and the new National Cancer Centre • Industrial plants and private sector – second LNG terminal, Phase-3 expansion of the Jurong water reclamation plant, and the expansion of various plants in Jurong Island – Mixed Development at Funan Centre
TTJ (SGX:K1Q) • Free float only 15%. Teo Hock Chwee is the
founder and MD who owns 85% • Makes delisting easy • $3m pay
Portfolio Performance
Portfolio
STI ETF
KLCI ETF
2013
-8.2%
+10.2%
+8.5%
2014
+35.1%
+5.3%
-4.3%
2015
+0.0%
-13.2%
-14.9%
2016
+8.4%
-0.3%
-1.8%
2017
+3.5%
+5.4%
-1.8%
CAGR
+11.6%
-0.2%
-5.8%
As of 28 Feb 2017
Strategy Weightage
Geography Weightage
Potential Portfolio Changes • Rebalancing mode – GP Hotels (sell when mandatory acquisition kicks – – – – –
in) PM Data (waiting for dividend amount before deciding) Hong Fok (hold till hotel contribute revenue) Hongkong Land (looking to sell because of 3y time stop with no catalyst in sight) PEC (sell if hit NAV) Earnings season -> Check for cut loss criteria
• Buy potentials shown in Watchlist
