Friday, July 25, 2008

Osim 2Q and SMRT 1Q

Seems like earnings seasons are coming, this means that I have a lot more to do analysing and musing over their results. I'm looking for signs of a general global slowdown due to the subprime fallout (if any). So I'll be looking briefly at results of companies which are of interest to me.

1. Osim announced their 2Q08 results.

My take:

Still losing money but compared to 1Q08, they improved noticeably, with the EPS going from -2.4 cts in 1Q to -1.1 cts in 2Q. To be fair their operating profit margins improved quarter to quarter, from 2.2% in 1Q to 5.3% in 2Q - still too low for my comfort level. Hello, you are selling luxury products, if your margins so low, how to sustain it when the going gets tough? Too many competitors in the industry all taking a chunk of your profits? Don't bullshit me about population getting older so need more health massage chairs - when there is no money to eat, the last thing anyone will buy is a massage chair.

They also mentioned that for brookstone, their ill-fated investment in US, had their closest competitor exiting the business. Must be damn bad, that's my first thoughts. Overall revenue is marginally better, improving from SGD115.6 million in 1Q to SGD115.9 million in 2Q. Brush up your act, Osim, show us a good turnaround story that will get investor rooting for you!

2. SMRT 1Q results

My take:

Revenue increased by 11.2% comparing 1Q08 to 1Q09. Must be the stupid gantries improving their business, I guess. However, total operating expense increased 13.1% too. This must be due to the combined forces of higher energy cost and higher number of train rides. They increased their peak hour train rides to satisfy their customers, after years of ignoring their pleas for more trains. As a result, their profit after tax increased 6.2% - bad at all.

Segment wise, I think their MRT business is still doing pretty well, despite the higher operating cost. They mentioned that if oil prices persist at high levels, their bus business (the old TIBS renamed as SMRT buses) will be affected. I agree. Buses are more affected by energy cost than trains, but trains have initially higher capex cost.

Interesting company...something that we as investors can always feel the pulse of the business since it's so directly affecting us. Very good cash flows. Total debt to equity of around 1.05, but current ratio of 1.7 - given their strong cash flows and stable, recession proof business, it's very okay. Want to beat the fare hikes? Buy their shares and get cash rebates off the dividends given.

6 comments :

Derek said...

Hi LP,

Any advice on a good price to buy SMRT? As this stock is pretty recession proof, I will like to add this into my portfolio.

Side track a bit, my Kopi Aunty in office like to talk to me about SMRT. She commented that when SMRT needs money, they will issue stock and the price will fall like crazy. Now that SMRT don't need money hence the stock never fall. She's always telling me that she wish SMRT will fall so that she can buy the stock.

la papillion said...

Derek,

I'm interested in the business and possibly the company as well. Want or not, we do an analysis on it and share our thoughts?

We can set a dateline and work on it together loh. Can learn together too :)

A good support level is 1.74, from TA pt of view.

Drizzt said...

there seems to be strong support at 1.77. whether its support or resistance depends on which side of the fence you are at.

yield is reasonable if there is reasonable growth. question is whether growth will be reasonable.

i tend to think there is little safety in buying at this price.

la papillion said...

Hi Drizzt the Dark elf :)

Thks for taking time off from fighting orcs and giants to visit my blog :)

I haven't really pore through the results yet, but am going to do so soon. Yield now is around 4.4%. I would be happy to have around 7% yield. From a rough calculation, perhaps $1.10 might be a good point.

Perhaps must wait for terrorist attack before such prices can be reached.

SBS transit seems to offer better yield at 8+%, but I'm not sure if that includes any special dividends (i lifted this figure from another blog). But in my opinion, smrt makes a better business than sbs.

Derek said...

Hi LP,

I will wish to analyze SMRT as well, using Peter Lynch's principles but I cannot set a dateline because I've too much work in hand. I will email you my progress once I have started analyzing on SMRT.

Cheers!
Derek

la papillion said...

Hi derek,

Yea, it's not a problem. You do as and when you can afford the time :) I'm also heading into my peak season, going to be damn busy for the next few months.