AEM - FY2021 (SGD 4.20) - 03 Mar 2022

Target

AEM's Target in Year 2021 is SGD550mil and they able to hit the target. 

Company has provided Year 2022 target between S$670 million to S$720 million. 

Let's look at financial Yr 2021 results. 

Income Statement

In 1H2021, company has mentioned that there are strong uptick on year 2H2021 and from the revenue we can see that it is a fact. Integrity and honesty are always the most expensive thing in the world. 

In Yr 2021, company able to achieved 565mil revenue but not to forget some of this revenue contributed by CEI that recently acquired. Nonetheless, company able to generate gross profit of 186mil which 12 percents higher than FY2020. 

From the income statement, we can clearly see that company is heavily invested in R&D which is about 10percent of Gross Profit. Hence, the net profit for this year is lower than last year about  6percent. Hopefully with 10percent of investment in R&D can get a better return for Yr2022. 

High SG&A is due to transfer and professional fees of acquisition of CEI. 

Balance Sheet

Looking at the balance sheet, the 1st thing 1st I will look at intangible assets or goodwill. Intangible or goodwill shouldn't more than 30percent of Total assets. Company has about 13 percent of intangible assets against Total assets. 

Inventories jump significantly and company explained that inventories increased due to the consolidation of CEI Limited and higher inventory holdings at year-end to meet anticipated increase in production and sales volume.

Trade and receivable increase significantly, it is a warning if the TR keep increasing. But looking at the Trade payable, it also increase significantly. With this, it should not have cash turn around issue. 

From Balance sheet, we can see that the company is net cash company. 

Cash Flow

Company able to generate positive cash flow. With termasek private placement, company has extra cash on hand to acquire ATECO and buy assets. 

Calculation

Let's do a quick calculation, assume net profit margin is 15.5% 

SHE - 301,889,000

Revenue - 670 and 720 mil

Net profit - 104mil and 127mil

EPS - 0.34 and 0.42

Today price - SGD 4 (7 Mar 2022) 

Price / EPS = 4 / 0.34  = 11.7 and 4/0.42 = 9.5

ROE = 104 mil / 402,514,000 = 25 and 127 mil / 402,514,000 = 31

Undervalue stock.

SingMedical FY2021 (26 Feb 2022) - (SGD 0.305)

 Financial Information

FY2021 Singmedical report, my biggest lost at this moment. Holding for 5 years and keep seeing the company grow but price is not grow yet. Let's look at the performance. 

Income Statement

FY2021 revenue increased 13mil or 15.5percent compare to FY2020. But this is not a fair comparison as we know that FY2020 was hit hard by pandemic. Let's compare it with pre-covid moment. 

FY2021 - 100 mil , GP - 44mil , EPS - 3.23 , GPM - 44%

FY2020 - 87mil , GP - 38mil , EPS - 1.81 , GPM - 44%

FY2019 - 95mil , GP - 43mil , EPS - 2.83 , GPM - 45%

From the comparison, we can see that the business is back to pre-covid year. 

Balance Sheet

I can't emphasis enough on the importance of the balance sheet, especially on the goodwill and intangible assets, goodwill should not more than 30 percent of total assets . Besides these 2 items, we also need to look at account receivable,  it should not more than 30 percent of revenue as well. 

From the report, we can see that loan and borrowings were reduced which is a good sign and also the cash and bank balances were increased. 

Cash flow

CFFO increased 4mil and management keep acquire businesses into the group. Overall, company generate positive FCF. 

Segmentation:

Revenue is about 100mil and 62 mil from health segment and 39 mil from diagnostic and aesthetics. 

Summary

No doubt the revenue is keep increasing YoY and company able to increase the EPS. CEO mentioned that aesthetic business is overwhelmed and wanted to expand locally in women's and children's business also aesthetic business. Dr.Beng keeps emphasize on medical tourism which previously contributed 15-20percent of the company revenue. With opening border, will medical tourism back to normal? Aesthetic business will still overwhelm or customer will go over Malaysia to do the facial treatment? Nonetheless, this result I would say is acceptable. 

Dr.Beng has mentioned that they focus will be at suburban expansion . 

Simple calculation:

Outstanding shares: 486,382,109

EPS: 3.22

P/E = 9.47

ROE: Net profit / Total equity =  15,716 / 166,538 = 9.4%

CAGR Rev - 5 years (2017 - 2021) - 8%

CAGR EPS - 5 Years (2017 - 2021) = 9%

Sasseur Reit (22 Jan 2022) - Current price - 0.815, DY - 8 percents

Introduction

Sasseur Reit listed on SGX in 2018.  There are 4 properties under Sasseur which located in:

1) Chongqing Liangjiang

2) Chongqing Bishan

3) Hefei

4) Kunming

All these shopping mall is outlet store. 

Financial

Referring to the table above, occupancy rate was dropped in 2020, it is due to Covid restriction in china. In Year 2021, occupancy rate has overall increased to 93.7 in Q3 2021. 

My thought

I've tried to do some research through tik-tok and found that Sasseur outlet business is not that good as I thought. Nonetheless, I would think that outlet definitely a business that can maintain as I prefer to shop at outlet rather than other retail shop because it is cheaper than others. 

Risk - WALE 1.3 years, meaning that turn over is fast and company may have difficulty to get another tenant in the short time. 

Let's do some calculation: 

Price - 0.815

est DPU - 6.545 x 2 + 6.533 / 3 = 6.541

Dividend yield: 0.06541 / .815 = 8 percents

I think 8 percents is really a good return. This can be consider. 

AEM Q3' 2021 (Price - SGD4.78) (Calculate IV = 6.21)

 Target:

AEM target - 2020 - 520Mil

Acquire CEI on 2020 - Revenue - 140mil 

AEM target 2021 - Increase from 525mil to 550mil. 

Financial

From the table, we can see that revenue and profit increase every quarter. If AEM want to achieve 550mil, they need to get 212mil revenue in Q4. Looking back at 2020 result, they've set 520mil target revenue and they had achieved 518mil. That mean that management is setting a reasonable and achievable target. 

With the worldwide material shortage, AEM may have buy more to keep stock and causing inventories increase significantly. Cash has increased 51 percents . 

Business outlook

AEM mentioned that Q4 and 2022 demand will increase and they are working with top 20 semiconductor company on technical. 

My thought

I think the 550mil target revenue is abit low, AEM has acquired CEI and their revenue is 140mil. Meaning that AEM only contribute 410mil for this year? Lower than last year about 110 mil. 

Let's do a quick math: 

Price - 4.78

Assume Revenue - 550mil , Earning - 15.5% of 550mil = 85.25mil 

Assume Earning per share - 0.27

SHE- 308,792,506

P/E = 4.78 / 0.27 = 17.7

ROE = 85.25 / 368.792 = 23%

If P/E = 23 , price = SGD 6.21

Xinyi Solar (16 Oct 2021 - HKD 15.90) (17% IV - 14.28 and 8% IV - 9)

 Company Profile

Xinyi Solar is a company produce solar glass panel. There are few plants in China and 1 plant in Malaysia and their melting capacity is 11,800 tonne/day. Beside produce solar glass, they also have their own solar farm business, they are total 42 solar farm and able to generate 3,322 MW. 

Financial performance

 As we can see from the table, revenue is increasing and EPS growth is 6.6% from 2017 to 2020. EPC is one time service, if we take out EPC it will be 17% CAGR from 2017 to 2020. 

Income Statement

Due to high demand of the solar panel, revenue is doubled from the previous quarter. This is due 1H 2020 having lock down and affect the delivery and installation. Profit also doubled compared to 1H2020. 

Balance Sheet

From the balance sheet, we can observed that receivable is tremendous high. Apparently, company is not doing a good job on getting the cash back or it may be is a "financial reporting skill". Company is in a net cash position. Receivable is 20percents of total assets or the whole year of 2020 revenue and this is alarming. 

Cash Flow

Looking at the table above, we can clearly see that will the high CFFO, company is generating positive FCF. Company keep expanding the business, hence it will lower down the cost of production. Company also mentioned that they keep improving the production and process to have high efficient of production. 

My thought

My only concern is the receivable, with the high receivable , company may default the payment and some of the receivable is > 2 years and is alarming! 

Let's calculate the IV. 

Guestimation:

Price = 15.90

EPS = 0.60

P/E = 26.5

Ordinary shares = 8,810,127,000

Shareholder Equity = 33,814,601,000

ROE = 0.6 X 8,810,127,000 / 33,814,601,000 = 15%

Using EPS Discount flow to calculate IV: 

PEG - 1.76

17% growth = IV - HKD14.28 

8% growth = IV - HKD 9.00

CE scoring - 70%

VICOM (26 Sep 2021 - SGD 2.01) - Dividend calculator - (IV = 1.3 , 5 percent)

Business Overview

Vicom is company that doing vehicle inspection. Vicom holds 100 percent stack of Setsco and Setsco is a company doing testing (ie. NDT, water test and etc). Vicom has total 7 locations doing vehicle inspection business and 1 location doing non-vehicle testing business. 

2020 Financial Summary

Year 2019, Vicom has exercise 4 to 1 stock split. 

From the table, we can observed that Revenue is hovering around 100mil. Due to pandemic in 2020, business is impacted and only able to achieve 86mil. Average operating profit is at 34.2mil. Return on equity is around 20!!! What a good company!!!

Income statement (1H2021) 

1st half revenue increase 23 percent due to Singapore is slowly loosen the control. Besides that, Singapore also provide support 1.2mil for the company. PAT increase 23 percent. 

Balance Sheet

From the balance sheet, we observed that company cash reduce 12mil. This is due to dividend given to shareholder about 22mil. Other than that, there is not much changes. 

Cash flow

Company generated positive operating activities about 12mil and capex only 8mil. FCF - 4mil. 

Company dividend policy is 90percent of the profit. But in 2017 and 2018, they declare 120percent of profit for dividend

My thought

Vicom from SGD2.25 dropped to SGD2, drop about 12 percent. 

Let's have a rough calculation on this stock whether it worth to buy it. 

EPS: 3.38 X 2 = 6.76 

P/E : 30

ROE: SGD 24MIL / 125MIL = 19%

This stock not a growth. Hence, we should use dividend approach to calculate the intrinsic value. 

Avg dividend - SGD0.066

My dividend expectation is at least 5 percent for Singapore stock. 

DY = 0.066 / X *100 = 5

IV = SGD1.3 

Current DY - 0.066/2.01 = 3.2%

Even though company provide 120% dividend in year 2017 and 2018, but in one day it will definitely stop paying for 120% as the cash will keep dropping and remain 90percents. For conservative investor, we will plan for the worst and hope for the best. 

Although the company has high margin of profit , no debt and high ROE. But it still not a stock that worth to hold at this moment. 

VALUETRONIC (12 Sep 2021 - 0.59) FY2021

Financial information - FY2021 (Mar 2020 - Mar 2021)

Valuetronic FY2021 report, from the table we can notice that Revenue contributed by CE drop significantly, this is due to was due to a key customer experiencing weak demand and its production switch-over from the Group’s China factory to another vendor in an ASEAN country as scheduled.

For ICE, the surge in demands in logistic industry and e-commerce benefited several key customers

during the pandemic lockdown. The prolonged pandemic also caused a delay in the schedule of a customer in the auto industry in its production switch-over from the Group’s China factory to another vendor in North America, which led to continued orders from that customer during FY2021.

Vietnam Campus

Vietnam campus will commenced by end of FY2022 (Mar 2022). It provides EMS, machining and injection molding services. 

My thoughts

From previous report management team keeps highlighted revenue will drop significantly. Need to wait for next half year report to know the shifted of the company will caused how much drop in revenue. From the other EMS industry, seem like they are in ramping stage but Valuetronic is slowing down. Management unable to keep the current customer causing revenue drop. 

From the report, the group revenue is contributed by 4 main customers and each contributed more than 10 percents of the revenue. This is a big risk due to depends on the main customer, the group should diversify the customer. 

Let's have a brief calculation. 

If revenue drop 20percents for next quarter. 

2021 Revenue drop 20 percents - 2281mil x 0.8 = 1824 mil 

Net profit margin - 7.5%

Net profit = 136.8mil

Ordinary shares = 435,048,782

EPS = HKD 0.31 = SGD0.053

With current price - 0.59 

PE = 0.59 / 0.053 = 11.13