QAF FY2016 Results

QAF Revenue for FY15 $998,278 decreases by 11% to FY16 $889,520. Cost of material decreases by 13% from FY15 $521,069 to FY16 $453,121. Staff cost is reduced by 11% from FY15 $226,958 to FY16 $200,975. Overall, the management of the company is very prudent and good. Disregarding exceptional item of $59,375, the Profit before Taxation will be 130,615 - 59,375 = $71,240 which is still slightly higher than FY15. This is due to the cost control. Group revenue decreased by 11% to $889.5 million for financial year ended 31 December 2016 (‘FY 2016’) from $998.3 million for financial year ended 31 December 2015 (‘FY 2015’). The decrease in Group revenue is mainly attributable to deconsolidation of financial results of GBKL from that of the Group’s, as the Group sold 20% of its shareholdings in GBKL in April 2016 in compliance with regulatory requirements. This reduced the Group’s stake to 50% of GBKL’s total shareholdings. Accordingly, GBKL ceased to be a subsidiary of the Group and has become a Joint Venture of the Group. Increases in sales were achieved by all business segments of the Group – Bakery, Primary Production and Trading & Logistics. The Group’s Bakery segment achieved overall increase in sales through the launch of new products, increased market penetration as well as from newly installed additional production facilities.

Group Finance Costs (interest expense) increased by 13% to $2.9 million in FY 2016 as compared to $2.6 million in FY 2015 due to higher borrowings.

Current liabilities decreases from 220,356 in FY15 to 165,392 in FY16. Non-current liabilities increases from 51,494 in FY15 to 78,863 in FY16. Overall the total liabilities for FY16 decreases compared to FY15.

On cash flow statements, Net Cash from Operating Activites increases from $86m in FY15 to $101m in FY16. The Free Cash Flow increases for FY16.

The Group is exposed to certain markets in the region which are expected to experience continuing slow growth in 2017. Furthermore, the regional currencies may face volatility and pressure. These factors may result in reduced consumer spending and higher costs. The Group also faces risks of escalating costs especially higher energy and fuel costs in line with higher oil prices as well as higher flour prices in certain markets. In the bakery business, the Group is facing heightened competition; in Singapore with an existing
bread company and in the Philippines with a new entrant to the market. In Malaysia, any further weakening in Malaysian Ringgit (“MYR”) will result in higher import prices, in particular, raw materials and distribution costs. While the Group is taking steps to mitigate the above, these factors are expected to continue to be challenging.

Although the company is facing competition and rise in cost, with its strong balance sheet, it is able to strategize to increase its global footprint, especially in China market. 

28/2/2017
Yesterday, for QAF, Mr Market overreacted and drop up to 11% before recovering back to $1.42. It could be profit taking or people felt that the price they sold the stake of GBKL at an undervalued price. I am waiting for further correction. 

Sembcorp Marine FY 2016

Sembcorp Marine Group returned to profitability in FY2016 and generated operating cashflow of S$669million, compared with negative S$867million for FY2015. Net Profit for FY16 was S$79 million.

Significant deliveries made in FY 2016 include:- 

• Noble Lloyd Noble, the world’s largest ultra high-specification harsh environment jack-up rig, to Noble Corporation; 

• Safe Zephyrus harsh environment accommodation semi-submersible to Prosafe; • FPSO Professor John Evans Atta Mills to MODEC; 

• Maersk Highlander harsh environment jack-up rig for the Culzean Field; 

• Ivar Aasen Process, Drilling and Quarters (PDQ) Platform Topsides to Det Norske; 

• Six LNG Modules for the Wheatstone LNG project for Chevron. 

• Siemens Dudgeon project/ Yamal LNG processing module 

Key ongoing projects include: 

•Engineering & construction of world’s largest semi-submersible crane vessel for Heerema; 

• Design and construction of new Floating Storage and Offloading (FSO) vessel for MODEC; •Engineering, Procurement and Construction (EPC) of harsh environment topside modules for Maersk Oil, including a central processing facility, wellhead platform and living quarters platform; 

• FPSO Pioneiro de Libra conversion for Libra field, offshore Brazil; 

• FPSO topsides modules construction/integration at EJA Yard in Brazil; 

• Construction of power generation module at SLP yard, UK; 

• LNG modules work at Indonesian yards; 

The management also addressed restructuring measures to reduce manpower, salary freeze and adjustment to variable remuneration for management staff to reduce operating cost. This is good but they should do more to reduce pay from the management staff. The new yard CAPEX will only proceed if required for new contracts else it will be deferred.

The divestment of COSCO shipyard group will realise a gain of S$48.32m.

Borrowings increased by 23% from 3,380 in FY15 to 4,155 in FY16.

One of the new story which I think is a good idea is Gravifloat. Sembcorp Marine increased stake in Gravifloat to 56% after buying an additional 44% for US$38 million. Gravifloat was formed to design, deliver and operate redeployable, gravity-based, modularised LNG and LPG Terminals for installation in shallow waters. Incorporated in Norway in 2006 as a spin-off of LMG Marin (a marine & engineering and naval architecture company), Gravifloat is headquartered in Bergen. Gravifloat technology allows the LNG terminal to be fully built and completed at a shipyard and installed in shallow waters to facilitate direct ship loading of LNG. It offers a more cost effective solution compared with FSRU (floating, storage and regasification units) and land terminals, and can be designed for both liquefaction and receiving terminal services.

Overall, I believe Sembcorp Marine has performed very well for Q4 FY16. Give it another quarter and it should reinforce the fact that the worst is over and company will slowly recover through this big oil and gas correction. Do note that it does not mean Sembcorp Marine will suddenly outperform as oil majors have not increased their CAPEX much and there are excessive tonnage in the market. The repair and innovation to reduce cost for contractors and vessel owners will be critical for the next few years.

Sembcorp FY 2016

Sembcorp revenue decreases by 17.2% from FY15 9,544,621 to FY16 7,907,048. Cost of Sales decreases by 22.8% from FY15 8,812,960 to FY16 6,801,916. I see restructuring in terms of reduction in terms General & Administrative expenses to $360,827. General & administrative expenses for 4Q16 were lower due to lower allowance for doubtful debts. 4Q16 also included refinancing costs for Thermal Powertech Corporation India Limited (TPCIL). Allowance for doubtful debts and bad debts in 4Q16 mainly pertained to Utilities’ India operations and Marine is at $4,671. 4Q15 included Marine’s allowance made for rig building contracts and from Utilities’ exiting of chemical feedstock business in Singapore is at $201,470. Allowance made for impairment losses for interests in associate pertained to Marine is $2,120. Write-back of impairment of Utilities UK’s fixed assets consequent to the extension of customers’ contracts is $6,707. This indicates to me the worst may be over for Sembmarine. 

Do note on the increases in finance costs for FY16 402,009 from FY15 237,984, which is an uplift of 68.9%. Higher finance costs in 4Q16 was mainly due to Utilities’ India thermal power plants which achieved commercial operation in phases and finance costs were no longer capitalized but expensed to profit or loss, and included other charges relating to TPCIL’s refinancing. Higher finance costs in 4Q16 was also due to Marine’s higher bank borrowings. 

On the Balance Sheet, it is seen that both current liabilities and non current liabilities are inching upwards. The total liabilities increase by about $2b. The net assets and equity shares of subsidiaries, property, plant and equipment which are collaterised for secured loans should already been heavily discounted by the banks. 

On the Cashflow Statements, Sembcorp Group shows overall improvement in the cash status. Cash flows from operating activities before changes in working capital were $1,324.9 million in FY16. Net cash from operating activities for FY16 was mainly due to Marine’s receipts from completed rig building projects; partially offset by Utilities’ India working capital for operations. Net cash outflow from investing activities for FY16 was $800.6 million, mainly from step-up acquisition of subsidiaries and purchase of property, plant and equipment primarily for the expansion and operation of Marine’s yards, partially offset by proceeds from divestment of SembAP and dividends received. 

Utilities' Prospect
Utilities’ China operations delivered record profits in 2016. Its performance in 2017 is expected to remain steady although lower than 2016 due to the expiry of the Yangcheng cooperative joint venture agreement in 2016. In India, Sembcorp has two thermal power plants and renewable energy assets totaling over 3,600 MW. The second thermal power plant, SGPL, commenced full commercial operations in February 2017 but has yet to secure long-term power purchase agreements. As the spot and short-term power tariffs remain weak, its performance is expected to be adversely affected. In Singapore, the centralised utilities, gas and solid waste management businesses are expected to remain steady. However, the power business continues to face intense competition. Operating performance in the other regions is expected to be stable. The Utilities' business remains focused on operational excellence as well as the execution of its pipeline of projects to deliver long-term growth.  

Marine's Prospect
While prospects for the oil & gas industry have taken a more positive turn following the November 2016 agreement by OPEC and major non-OPEC countries to cut production, Sembcorp Marine believes a more robust recovery may take longer. Despite the challenging outlook and intense competition, Sembcorp Marine believes that growth prospects for the offshore and marine industry remain positive in the medium to long term. However, with increasing enquiries for non-drilling solutions, Sembcorp Marine foresees an earlier recovery in demand for fixed platforms, FPSO and FSO conversions and new-builds in the next few years. Rising global demand for gas also augers well for its broad-based LNG solutions and capabilities. Sembcorp Marine believes these are the key segments that will offer opportunities in 2017. Sembcorp Marine’s strategy and focus remain anchored on strengthening and optimising its talent pool; pursuing operational excellence in executing its projects; investing in new capabilities, products and technological innovation to help grow its order book; and prudently managing its financial resources to preserve financial flexibility and ensure overall sustainability of its business.

Dividend
FY2016 Dividend is at 8.0 cents per share which is less than FY2015 11 cents per share.

Conclusion
I used to hold large position (in my context) in Sembcorp. I am interested in this company again as I think the worst is over and turnaround is here. 

Raffles Medical FY 2016

Revenue increases from 410,535 in FY 2015 to 473,608 in FY 2016 which is an increase of 15.4%. It was noted that staff costs inevitably increases by 18.8% from 203,537 in FY 2015 to 241,736 in FY 2016. In the financial statement itself, it explains that the staff cost increases due to acquisitions and increases in hiring of doctors, nurses and administrative personnel. However, the increase in staff cost does not directly translate to an increase in revenue. I feel investors should not penalise Raffles Medical heavily on this. The results can only be justified after another 1-2 quarters. Profit attributable to owners is slightly higher than the previous year at 70,210 in FY 2016 compared to 69,291 in FY 2015.

It was further explained that investment properties increased by S$27.6 million due to investment property development expenditure for Raffles Hospital Extension and Raffles Medical Shanghai Hospital Project. The Group's net cash position increased from S$53.8 million as at 31 December 2015 to S$81.5 million as at 31 December 2016. This was mainly contributed by the strong operating cash flows from its business operations. Unsecured loans repayable after one year as 31/12/2016 of S$16.947 million is easily covered by its cash position. 

Net cash from operating activities increases from S$72.816 million in FY 2015 to S$78.854 million in FY 2016. Purchase of PPE decreases by almost half. In addition, Raffles Medical made a big sum of repayment of bank loans at approximately S$98 million.

Raffles Holland V has almost 95% of the space committed. I went to the site and took a look at it. 

The picture is taken from courtesy of Yahoo. As you can see one of the key tenants is DBS with a range of restaurants on the 2nd floor. I believe this business unit will contribute and boost the Group's results in the coming year.

Overall, I feel this is a resilient business, easy to comprehend and highly lucrative. I am a customer of Raffles Medical Group, I will do a full body check up and it will easily cost S$500+ per session (during the good times and covered under company's medical insurance to a certain limit). The hospital at Bugis is usually packed with wealthy students from overseas and expats. 

ST Engineering FY2016

Profit before tax (PBT) dropped 6% to $590.6m from $630.3m, and net profit attributable to shareholders (Net profit) was 8% lower at $484.5m from $529.0m in the prior year.

Aerospace sector revenue increases by 19% from 2096 in 2015 FY to 2493 in 2016 FY. Profit before tax (PBT) increases by 3%. Main geographical improvement is in Europe which sees a rise of revenue by 226%.

Electronics sector revenue increases by 10% from 1743 in 2015 FY to 1910 in 2016 FY. Profit before tax (PBT) increases by 9%. 

Land Systems revenue decreases by 6% from 1401 in 2015 FY to 1312 in 2016 FY. Profit before tax decreases by 66% from 65 in 2015 to 22.2 in 2016 FY. 

Marine sees a decrease by 12% from 958 in FY 2015 to 841 in FY 2016. PBT decreases by 15% from 88.3 in FY 2015 to 75.1 in FY 2016. Free Cash Flow is still positive.

Overall, the business is stable and a consistent strong yield stock. On 17th Feb, it shot up by 6.8%.

UOB FY2016

UOB produces another stable quarter. FY 16 profit is S$3.1 bn, which is slightly lower YoY. The higher net interest income and fee income offset by lower investment income. Net interest income up 1.3% to S$5bn, led by healthy loan growth. Loans are up 8.8% YoY, with selective targeting of quality credits. The NIM is -6 bps to 1.71%, although it has stablised over last 2 quarters. Non-interest income remains flat at S$3.1 bn. Higher fee income rises 2.5% YoY which is offset by lower trading and investment income which is reduced by 8.1% YoY.

Portfolio quality is broadly stable. NPL ratio is up slightly at 1.5% with high general allowances-to-loans ratio of 1.2%.

Bottom line is dampened by higher allowances from offshore and marine sector. We heard about the Ezra's impairment issue.

Wealth management did pretty well, focusing on growth on mass affluent and high net worth segments. It increases by 8% YoY, profit increases 16% YoY, at $93bn AUM as at end 2016.

ThaiBev 1Q17

Highlights

The fiscal year from "1 January to 31 December" is changed to "1 October to 30 September". The new fiscal year for 2016 was 9 months to 30th September 2016. The fiscal year 2017 will be 12 months from 1 October 2016 to 30 September 2017.


There is a decline in domestic consumption during mourning period in Thailand. Total sales revenue dropped 8% by Baht 4,051 million. Thaibev is dominant in spirits market. Maintain growth in net profit, net profit excluding F&N/FCL increased 12.1% to Baht 6,138 million, net profit including F&N/FCL jumped 29.1% to Baht 7,743 million. There is lower net loss in non-alcoholic segment.


Financials

The way business owners approach management is different from scholars running a corporation. Not a lot of scholars know how to run a business as they are not entrepreneurs to start with. If you look at the financial statements of Thaibev, you will realise the cost control aspect is amazing unlike our Singapore companies. The selling expenses, cost of goods sold, administrative expenses are decreased. Total expenses decreased from 44,857,176 in 2015 to 39,655,839 in 2016.


There is a consistent positive free cashflow, a constant paydown of debts for financing and the company is seating on a heap of cash. The cash is used to acquire companies like Vinamilk.


Conclusion

ThaiBev is a brilliant company. Good quarter results. The market has already reflected on this. Today the share price increases by 5%.

Singpost FY 2016/2017

Q3 FY16/17 Summary

Revenue rose 16.8 per cent to S$369.4 million for the third quarter of FY2016/2017. Underlying net profit was down 28.5 per cent due to operating losses in the US eCommerce business, Regional eCommerce Logistics Hub costs, and a decline in domestic mail volumes. Q3 FY2016/2017 dividend of 0.5 cent per share declared compared to 0.15 cent per share for last year. Operating Profit decreases from Q3 FY15/16 54.6M to Q3 FY16/17 37.3M. 

Revenue movement is pointing towards a stronger business than previous year. I like this part of the story where it is seen as a holistic e-commerce and logistics company with the support of Alibaba Group. This is a move by Alibaba to pit itself against Amazon. In fact those in ecommerce will understand Aliexpress/Alibaba complements Amazon instead of been seen as a competitor.

I dislike this portion of the acquisition. The question here is "Did Singpost overpay for the new headcount?"

I am concerned on the lower mail volumes. As we are moving into the digital age and alot companies are going green by using e-statements/ soft copy, the demand for letter mail will naturally decrease. 

Looking at Cashflow Statement, FY 2016/17 is a better year than FY 2015/2016 as all the CAPEX has been spent already. The total Free Cashflow is improving for this FY 2016/2017. However, I saw a big ticket item on increase in bank loan, increases from 253,113 to 522,031. Nonetheless,  Interest coverage ratio remained healthy at 24.7 times, compared to 42.1 times last year,  its cash position is relatively good but at the expense of cutting dividend. I still think Singpost's dividend policy should not be changed. They should reduce their staff cost, pay them with dividend. You can use your dividend model to derive the intrinsic share price of Singpost. This is on my watchlist for now.

13/2/2017

Mr Market whacked the share price of Singpost and share price tumbled more than 7 percent in the morning. TradeGlobal, the US ecommerce firm Singpost acquired in 2015 is expected to incur losses for full year. TradeGlobal accounted S$169 million in goodwill and S$43 million in customer relationships in the intangible asset. I am waiting patiently for the big cut in price.

14/3/2017
Today the share price hit lowest at 1,32, Let's see whether it will reach close to 1.25.

QAF Ltd

Introduction to QAF
QAF Limited is a leading multi-industry food company listed in Singapore. Its core businesses are bakery, primary production, trading and logistics. 

The QAF Group has an extensive network of operations across the Asia-Pacific region including Singapore, Malaysia, the Philippines, Australia and China.

The principal activities are:

Bakery Operations: 

QAF manufacture and distribute packaged loaf bread, pastries and bakery products in Singapore, Malaysia, the Philippines, Australia and China.

Pork production, processing and distribution 
QAF is the largest producer of pork meat in Australia.

Feedmilling 
The feed mills in Australia manufacture pelleted stockfeed for a broad range of livestock.

Food trading and distribution 
QAF imports and distribute a wide range of liquor and food products.

Food manufacturing 
QAF produces own proprietary brands of food and beverage products.

Warehousing and logistics operations 
QAF operates a comprehensive logistics operation including warehousing and distribution.


Key Brands



Management
Tan Kong King is the Group Managing Director, he has worked for a number of years with an international accounting firm before joining QAF in his current role. In 1996, he streamlined and refocussed the QAF group's business expanding in existing bakery segment, disposing of non-food related operations. He is not related to the Chariman Mr Didi Dawis. The day to day management of the Group is through Mr Tan and assisted by Deputy Group Managing Director and other executives.

In 2015, Mr Tan is drawing a salary of about 2m. 

The directors' fees are nominal and interestingly none of the immediate family member's remuneration exceeds $50,000 for the year 2015. They own shares of the company and are remunerated through dividends. Their interest is aligned with shareholders.

High-level Financial Reviews

From Thomson Reuters, it shows that net profit margin for Sep 16 increases to 8.98% compared to 2015 5.48%. Return on equity increases from 12.52% to 16.7% in Sep 16. Price to Cash Flow is 6.85 and is lower than 15.57%. Long Term Debt to Equity Ratio is very low at 7.6. Receivable Turnover is excellent at 10.06 compared to the industry norm of 29.09.


Net Income is a constant upward trend. Gross Profit is a constant upward trend. (In future, I will show a graph, I am going out in a while to visit my friends for CNY). 

Retained earnings are increasing steadily over the years.

The Free Cash Flow is still positive over the years and constantly paying down the debts.

The dividend history has been consistently rising since 2008. 

Conclusion

I will not provide my estimated price for the company. Definitely, this company is added into my watch list. When the opportunity comes, I will acquire shares of this company.