Earnings report card (Part 2 of 2)

Refer to this link for Part 1 of Earnings Report Card.


6) Sun Hung Kai Properties Ltd (read here)

Good results

For 1H FY2016 vs 1H FY2015

  • Revenue increased 8.75% yoy.
  • Profit attributable to the Company’s shareholders increased 9.9% yoy (Excluding the effect of fair value changes on investment properties net of deferred taxation and non-controlling interests).

Hong Kong developer outperforming rivals amid market slump (read here)

SHKP may cut sales target by up to 15 per cent as demand for homes weakens (read here)


Sun Hung Kai reported a net gearing ratio of 11% for fiscal 2014, lower than Cheung Kong’s 34% and Kerry’s 25%, according to the rating agency.

“Sun Hung Kai would have the strongest buffer in case of a downturn,” said Standard & Poor’s credit analyst Esther Liu. “Our base case is given a further 50% drop in [property] prices, it will have enough buffer against a downgrade action.”

Future outlook:

The Group will continue to launch new projects in Hong Kong and on the mainland for sale when they are ready. The developer said it would slash its sales target by 10-15% amid signs that transactions of new residential apartments would slow down in the second half.

The Group will also replenish its land bank in Hong Kong when good opportunities with satisfactory margin arise. On the mainland, the Group will continue the selective and focused investment approach, mainly in first-tier cities like Beijing, Shanghai, Guangzhou and Shenzhen.


It seems that Sun Hung Kai Properties’ results are better than those of Capitaland’s. Moreover, the Total Debt/Equity of SHK is 18.28, while that of Capitaland is 64.39.


7) Vicom (read here)

Marginally good results

For FY 2015 vs FY 2014

  • Revenue decreased 1.3% yoy.
  • Profit after taxation increased 4.2% yoy.


The anemic results are expected, due to de-registration of large number Old Cars bought in 2007 to 2009 (read here). The passenger car population had fallen for two consecutive years to reach 575,353 last year – 4.1 per cent lower than in 2014, and the lowest it has been since 2009, latest statistics from the Land Transport Authority (LTA) showed.

In addition, there is no pricing advantage in the industry. The industry is regulated by the government and inspection fees for all nine centers (VICOM, JIC or STA) are the same across the board. Prices still rise over the years but not by much – read here to understand the business of Vicom better.

The growth in profit is mainly attributed to cost cutting measures within the company as can be seen in the 17.9% decrease in Materials and consumables, 21.7% decrease in Utilities and communication costs and 17.5% decrease in Repairs and maintenance costs, while revenue only increase 1.3% yoy.

This is quite similar to SIA whereby there was a lack of top-line growth, but stronger profit on the back of lower operating expenses.

What is commendable is that Vicom’s dividend increased by a stunning 8.2%, from 18.25 cents for 2014 to 19.75 cents in 2015.

“Vicom FY15 – Steady Dividends Growth Play” by A Path to Forever Financial Freedom (read here)

“VICOM Limited’s Latest Earnings: Dividend Increases 8%” by Motley Fools (read here)

Future outlook wise:

Demand for vehicle testing services is expected to be lower as more vehicles will be deregistered during the year. Demand for non-vehicle testing services is expected to fall with the slow down in some pertinent industries.


For the blogger of A Path to Forever Financial Freedom, he has divested his Vicom shares given the slowdown in earnings and difficult outlook ahead (it is no wonder).

Ok, Vicom doesn’t have much control on the vehicle population (or the rate of de-registration), so one possible factor which it can control is the possibility of a vehicle inspection rate hike.

Accordingly to this article by Motley Fools:

According to analysts, as of 9 May 2014, the last time Vicom had raised fees was in 2006. Any potential fee hikes could be a boon for the company.

However, in another article by the Fifth Person, it stated the following:

A point to note is that there is no pricing advantage in the industry. The industry is regulated by the government and inspection fees for all nine centers (VICOM, JIC or STA) are the same across the board. Prices still rise over the years but not by much (see below):


That’s a $8.06 increment over the last 15 years – a CAGR of 0.93%.

Depending on which group you belong to, the slow increase in fees is good for consumers but bad for investors.

So a vehicle inspection rate hike is regulated and likely won’t be much. Nevertheless, as for me, I tend to hold on to my shares. Vicom has changed from a growth stock to more of a divivdend stock, but in the longer term (past 2019 perhaps), the increase in vehicle might once again make earnings growth attractive.


8) Golden Agri-Resources Ltd (read here and here)

Marginally Good results

For 4Q15 vs 4Q14

  • Gross Profit increased 1.5% yoy
  • EBITDA increased 3.6% yoy
  • Net Profit increased 10.3% yoy
  • Revenue decreased 14.8% yoy

Golden Agri – Nice Finish To The Year (read here)



Well, any good news for this company is great news. I am not worried about the poor results, rather am more worried if the company can survive a tough economy.

“Will A Recession Harm Golden Agri-Resources Ltd?” by Motley Fools (read here)

So far it has been two consecutive quarters of good results (although this quarter is only marginally good). Could this be the turning point? Hard to say. I can’t predict the volatility of CPO prices.

The increase in EBITDA and Core Net Profit was mainly generated by the downstream business. Improvement in EBITDA is due to production recovery and lower costs compensated for weaker CPO prices. The palm and lauric business has shown notable improvement since last year as the integration of new downstream assets progresses. The oilseed and others segments contributed positively, achieving full year EBITDA1 of US$16 million, a turnaround from a negative position of US$52 million last year.


Palm Oil Outlook: On the outlook for the future, GAR’s Chairman and Chief Executive Officer, Mr. Franky O. Widjaja, elaborated: “Long term palm oil industry prospects remain promising. As the most widely-consumed and best-value vegetable oil, demand fundamentals of palm oil continue to be robust. Meanwhile, we expect CPO price to rebound in the short term, mainly stimulated by estimated production decline resulting from severe El Niño in 2015 and the realisation of B20 biodiesel mixture mandate by the Government of Indonesia.”


I am happy for the marginally good results. Pity that the company has stopped paying dividend, so my passive income this year is compromised because of this. Hope things will turn out much better for this company and CPO prices.


9) Fastenal (read here)

Marginally Bad results.

For the 4th quarter results:

  • Net earnings decreased 5.5% yoy.

“Some Notes on Fastenal’s Results” from Base Hit Investing


This business is split about 60% production/construction needs and about 40% maintenance needs. The former is a great business, but it can be cyclical because about 75% of our manufacturing customer base is engaged in some type of heavy manufacturing. The sale of production fasteners is also a sticky business in the short-term as it is expensive and time consuming for the customers to change their supplier relationships. While the customer base values the capabilities we bring to the table, in the last twelve months this group of customers has seen a contraction in its production and therefore its need for fasteners.

During this time frame, the fastener product line has seen its daily growth decrease from about 10% growth in the last six months of 2014 to about 6% contraction in the fourth quarter of 2015. Said another way, their market share gains continue to be strong, but the contraction from their existing customers, plus some price deflation, has eliminated their growth and created contraction.


10) CapitaLand (read here)

Marginally Bad results

For 4Q 2015 vs 4Q 2014

  • Revenue increased 14.6% yoy.
  • Operating PATMI decreased 12.1% yoy.
  • Total PATMI decreased 39.5% yoy.

CapitaLand posts 39.5% fall in Q4 profit (read here)


CapitaLand Limited achieved total PATMI of S$1.07 billion in FY 2015, underpinned by the recurring income from its portfolio of investment properties and contribution from development projects in China. This is 8.2% lower than FY 2014 PATMI of S$1.16 billion, which was boosted by a one-off gain of S$123.5 million from the sale of Westgate Tower.

The absence of year-ago fair value gains exacerbated higher cost of sales.

CapitaLand also suffered a 59.4 per cent drop in other operating income during the quarter, to S$120.4 million. The was mainly due to the absence of a year-ago S$212.5 million fair-value gain following the completion of the CapitaGreen project.

For 4Q 2015, CapitaLand achieved a total PATMI of S$247.7 million and Operating PATMI of S$249.2 million. Excluding the profit from the sale of Westgate Tower in 4Q 2014, Operating PATMI improved by 55.7% in 4Q 2015, driven by higher handover of residential units in China and better operating performance for shopping malls and serviced residences.

Future outlook wise, Mr Lim Ming Yan, President & Group CEO of CapitaLand Limited, said: “CapitaLand remains focused on growth in our core markets of Singapore and China. For longer term diversification and balance, we will continue to expand in growth markets such as Vietnam and Indonesia. In China, we achieved our highest residential sales value of RMB15.4 billion in 2015, and we expect residential sales in the market to continue to perform steadily this year. Our new Raffles City developments are also on-track for completion over the next few years and we expect strong demand for these projects.”


Initially, I wanted to lump Capitaland’s results under very bad category. However, the results must be seen i context with the profit from the sale of Westgate Tower in 4Q14. If we exclude that, this quarter is actually a stellar quarter. Nevertheless, the cost of sales rose more steeply at $1.36 billion, up 25.9 per cent from the previous year, owing to higher project costs.


11) Super Group Ltd (read here and here)

Very Bad results.

For 4Q15 vs 4Q14

  • Revenue decreased 8% yoy.
  • Gross Profit no change yoy.
  • Profit attributable to Owners of the Company decreased 39% yoy.

“Super Group Ltd’s Latest Earnings: Mixed Results for the Year” by Motley Fools (read here)

“Super Group Margins Are Sustainable” by Invest with Lee (read here)

Value Invest Asia has did a good post about the company (read here), and I recently did a post on the company (read here).


In the last corresponding quarter, the Group made a gain of S$6.5m from the disposal of a property. There was no such gain in the current quarter. Coupled with a higher effective tax rate (4Q15: 25%, 4Q14: 10%) arising from withholding taxes on dividend remittances and expiry of tax incentives enjoyed by certain subsidiaries, profit attributable to owners of the Company for 4Q15 decreased by 39% to S$15.7m.

Despite the lower sales revenue (decrease 8% yoy), the Group’s 4Q15 profit from operating activities increased by 3% to S$21.2m, reflecting the Group’s robust income-generating capability.

Future Outlook:  The Group expects market conditions to remain volatile and competitive in the next twelve months.

The performance of Super Group is still pretty hazy, the improvement in profit form operating activities is marginal, and the outlook expressed by management is not encouraging. Nevertheless their financial position has improved, 2015 vs 2014 (Group’s net assets attributable to owners of the Company increased to S$521.9m, translating into a net asset value per share of 46.80 SG cents (31 December 2014: 44.62 SG cents)).

If we exclude the one time gain of S$6.5m from the disposal of a property in 4Q14, the Profit attributable to Owners of the Company decrease will be only 19% yoy (not sure how to consider the higher effective tax rate (4Q15: 25%, 4Q14: 10%) – but let’s include this course this may be recurring). Well, it is still bad, but not as bad as the previous quarters (check out my earlier post – read here), which show Profit attributable to Owners of the Company decreased by 26%, 29% 24% yoy. Hope it might slowly turn for the better.


12) Sarine Technologies Ltd (read here, here and here)

Very bad results

For  Q4 2015 vs  Q4 2014

  • Revenue decreased 32.3% yoy.
  • Gross profits decreased 33.5% yoy.

“Sarine Technologies Ltd’s Latest Earnings: 2015 Was A Year to Forget, But Better Days May be Ahead” by Motley Fools (read here)

“2 Market Darlings That Have Fallen On Hard Times” by Motley Fools (read here)


Given the poor results in the previous quarter, I wasn’t surprised by the bad results. The reasons for the bad results remain basically the same:

  • Dis-proportionally high rough diamond prices compared to diamond prices;
  • Higher than normal polished inventory levels.

Having said that, the report revenues although lower than the revenues of US$18.3 million reported in Q4 2014, it represents an improvement of 31% over the revenue of US$9.5 million realised in Q3 2015. The Group registered a net profit of US$1.5 million in Q4 2015, reversing the loss in Q3 2015. During the quarter, the Group delivered 13 GalaxyTM family systems, of which five were the new MeteorTM systems, expanding the total installed base to 215 as of 31 December 2015.

This is comparative better than previous quarter when only one Galaxy family system was delivered in 3Q15. Could this be the start of the turn-around? Let’s hope so.


Outlook wise, it appears good in the longer term base on their report.

“Evidently, the industry is over the worst of the downturn,” commented Mr. Uzi Levami, CEO of the Group. “With the reduction of inventories, working capital credit availability is also less of a problem in the midstream and Indian banks are reportedly softening their attitude towards the industry. Even though manufacturers are wary of Chinese market demand slowing, we are seeing record numbers of stones being scanned by our inclusion mapping systems and have already taken orders in the first two months of 2016 equal to the business realised by the Group in all of Q4 2015. Barring unforeseen circumstances, we expect midstream manufacturing activities to continue to improve over the course of the year,” he added.



Finally, in summary, I reckon this quarter / half yearly results have more companies not doing well as compared to the previous quarter.

Sarine Technologies & Super Group seems to be not improving (getting worse).


About apenquotes

Born in 1976. Married with 2 kids (a boy and a girl). A typical Singaporean living in a 4 room HDB flat. Check out my Facebook Page: https://www.facebook.com/apenquotes.tte.9?ref=bookmarks
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2 Responses to Earnings report card (Part 2 of 2)

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