Saturday, August 12, 2017

Can Katrina Group lives up to its expectation?

Just to share a brief background on Katrina Group. There are total of 9 brands under Katrina Group and 4 of them are Halal. All of these 9 brands are available for online food ordering & delivery services.

Katrina Group Ltd was listed on Catalist of the Singapore Exchange Securities Trading Limited on 25 July 2016. The price has surged to 38.5 cents from IPO price of 21cents on the day of debut. However, it has started to go down hill since IPO to the current price of 22.5 cents on 11-Aug-17.
Let take a look at Katrina performance over these few years.

The net profit in 2016 was affected due to IPO expenses of S$0.9 million. Overall, Katrina seem to be doing quite well in term of growing revenue and gross profit. Let move to the recent finance report for 1H2017.

There is combined factors of drop in term of gross profit and increase in operating expenses which lead to a substantial drop in net profit. In the report, they mentioned that the drop is due to a few factors:
  • Closure of some outlets in china
  • Increase costs associated with setting new outlets
  • Additional recurring statutory filing requirements and maintenance of its new Enterprise Resource Planning system
The cash flow from operation activities is a bit alarming as they need to generate sufficient money for investing and financing activities.


However, their current liabilities has also decrease by S$2.6 millions and non-current liabilities remain around S$1.1 million which is a good sign. Overall, I am a bit concern on how Katrina is managing their expenditure while expanding.

Using Swot analysis on Katrina

Strength
-Online catering/home delivery service
The revenue for this service is S$2.8 millions has exceed total revenue of S$2.5 millions for FY2016. This service will expect to do well especially change in the consumer habits.


Weakness
-Poor Branding
They have 9 branding under their companies but most of them do not strike a chord with Singaporean. They really need to work on their branding through marketing strategy.  
-Shortage and high cost of manpower
They have to make use of technology to overcome shortage and high cost of manpower.
-Change in consumer demand
As the world is changing fast, the consumer demand also changes and it is important to take note of this.
-Majority of the income comes from Singapore which would be affected if there is slowdown in Singapore. 


Opportunities 
-Expansion Growth Plan in PRC and Hong Kong
Through acquisitions, joint ventures, franchising agreements or strategic alliance. 
One of the most recent partnership is with Hong Kong listed Ajisen group to grow "So Pho"
-Halal Market
Halal food industry is growing at rapid rate and they have 4 Halal brands which can be position to capture the market share. Furthermore, Muslim population is the second highest population after Christianity and they are growing at a very fast rate. 
There is an article from business time on "Singapore companies well-placed to tap China's halal market." The article mentioned China's halal market is valued at US$21 billion and is one of the fastest-growing in the world but it lacks national standards & legislative support as its certification centres are only regional. 

Threats
-Change in oversea regulation
Due to expansion oversea, any change in oversea regulation might also affected the company.
-Currency exchange
As they are expanding oversea, there might be some Forex exchange losses.
-Competition from other F&B companies
Managing competition from other F&B companies and they will need to continue innovate to capture and maintain their customers.

I am a bit concern over the recent financial report for Katrina holding. Overall, Katrina has to work on their branding and management of their expenditure while carry on their expansion plan. However, it is not a call to buy or sell, please do your own due diligent. I will continue to share more information along the way. If you have any idea on how to help me on my writing, feel free to voice out. Thanks!

Sunday, July 9, 2017

MM2

MM2 has dropped around 15% from the peak $0.65 to $0.55 per share. Although I am not invested in MM2, it has been on my shopping list.

MM2 is Singapore based film production and distribution company which has produce popular titles like Ah boy to men and long long time ago. Now, the forth movie Ah boy to men is undergoing filming. Furthermore, it has also goes into cinema acquisition of golden village. This will help in further growth of the company.

To do this calculation, I use the data from SGX. The return on Asset and return on Equity meets my target. From EBITDA (Earning before interest, Tax, Depreciation and Amortization of a company) /Interest expenses also looks healthy. High ratio is sign of strong cash flows to cover its debt expenses while low ratio will indicate potential cash flow issue.


By using the normalized diluted EPS, I did some calculation for projected EPS for the future.
Using the margin of safety 20% and constant growth of 0.106, MM2 projected future share price in 5 years would $6.49 and target discounted price would be $2.61.

However, if the growth slow down by 50% while margin of safety remain at 20%, Jumbo projected future share price in 5 years would $1.26 and target discounted price would be $0.93 compared to the current price of $0.55

Using Swot analysis 

Strength
-Diversify earning
It is one of the leading content producer in Asia in 5 different countries (China, Taiwan, Hong Kong, Malaysia & Singapore). The group earning is quite diversify f rom all relevant stages of filming making process, distribution income, advertisement income and cinema income
-Strong management

Weakness
-Change in consumer demand
As the world is changing fast, the consumer demand also changes especially with the online streaming.
-Lack of good production
Availability of movie script is essential for good movie production. 
-Rise of interest rate
MM2 will require fund especially for Cinema expansion. Rise of interest rate will affect the borrowing cost and hence it will affect the profitability. 

Opportunities 
-Further cinema expansion
MM2 is quite aggressive in this cinema expansion which is good for further growth. 
-Possibility of going into Online movie streaming
With fast internet speed, some people prefer to stream movie online. This is opportunity which MM2 can look into.
-Oversea expansion into other markets outside Asia.

Threats
-Change in oversea regulation
Due to expansion oversea, any change in oversea regulation might also affected the company.
-Currency exchange
As they are expanding oversea, there might be some Forex exchange losses.
-Unable to secure distribution right
Managing competition from other entertainment companies

I am not holding any MM2 shares when I am writing this analysis but the current price of MM2 is pretty attractive. Furthermore, MM2 has a club which is a programme targeted exclusively at shareholders of Unusual Limited and MM2 Asia Ltd to offer a variety of benefits to eligible shareholders. Hence, I am planning to get some MM2 shares. Do note that is not a call to buy or sell, please do your own due diligent. 


Thursday, May 25, 2017

Is Jumbo still attractive or it has lost its shine?

Recently, Jumbo group has dropped around 20% from the peak $0.78 to $0.62 per share. Is Jumbo still attractive or it has lost its shine? I believed it is undergoing correction and potential to grow further. Using the calculation method which I learnt from "Gone Fishing with Buffett", I did some calculate to determine a target buying price.

To do this calculation, I use the data from SGX. The return on Asset and return on Equity meets my target. From EBITDA (Earning before interest, Tax, Depreciation and Amortization of a company) /Interest expenses also looks healthy. High ratio is sign of strong cash flows to cover its debt expenses while low ratio will indicate potential cash flow issue.


By using the normalized diluted EPS, I did some calculation for projected EPS for the future.
Using the margin of safety 10% and constant growth of 0.106, Jumbo projected future share price in 5 years would $1.03 and target discounted price would be $0.64.

However, if the growth slow down to around 0.05 while margin of safety remain at 10%, Jumbo projected future share price in 5 years would $0.80 and target discounted price would be $0.50.


Using Swot analysis from the previous posting on jumbo, I did some updates.

Strength
-Popular branding 
Most people remember Jumbo for seafood. In fact, it has other brands under its name like JPOT, Chui Huay Lim Teochew Cusinine, J Cafe, Jumbo catering, Jumbo eShop and one of my favorite: Ng Ah Sio Bak Kut Teh. I even bought quite a number of friends including Korean to Ng Ah Sio bak kut teh and they love it. 
-Strong management


Weakness
-Shortage and high cost of manpower
This is an common issue in service industry which they need to solve. 
-Change in consumer demand
As the world is changing fast, the consumer demand also changes and it is important to take note of this.
-Majority of the income comes from Singapore which would be affected if there is slowdown in Singapore. With the oversea expansion and Franchises, the income would be more diversify.




Opportunities 
-Expansion Growth Plan for 2017 - 2019
They have expanded to China which they are doing well. Recently, Vietnam franchise has just opened. Here is the growth plan for China and our neighbor countries. 

-Online catering/home delivery service
They have partnered with Foodpanda and DELIVEROO for home delivery service which helped to bring additional income. On top of that, they also do retail merchandise. 

-Branding
They can also bring other brands under their name to expand or come out with new brand to capture new market. I think Halal market is another big market for expansion.

Threats
-Change in oversea regulation
Due to expansion oversea, any change in oversea regulation might also affected the company.
-Currency exchange
As they are expanding oversea, there might be some Forex exchange losses.
-Competition from other F&B companies
Managing competition from other F&B companies and they will need to continue innovate to capture and maintain their customers especially bulk of their revenue come from Jumbo seafood.

Recently, I am quite impressed by the food freshness and their service quality when i visited Dempsey Hill outlet to celebrate Mother day. The staff are friendly and patient in explaining the dishes to us. They also paid attention to our needs.

I have entered a few lots of Jumbo as I believe they will continue to do well and furthermore it is also below my target discounted price. Do note that is not a call to buy or sell, please do your own due diligent.