Another solid quarter by my core holdings with the exception of 800 Super. IFAST and Food Empire reported strong numbers. Raffles Medical Group continues to execute its plan. Valuetronics and UMS coming under pressure from weaker short term guidance of their key customers but medium/longer term they should do well.
The tables below summarizes their performances for the latest quarter.
A
iFAST
Another record quarter for iFast with its net revenue up by 29% and net profit up by 56%. The company presentation provides a good information the quarter which I will not repeat here.
The group has benefitted from the broaden range of products and services that they have put in place. But they are not resting on their laurels and are pursuing future growth in China market. The expansion in China market will reduce its profitability but if they can get it right, the potential will be immense.
I have bought more at $0.90 and $0.91 last month which bring my average price to $0.92. This is currently my largest holding and takes up 9.5% of my portfolio. No intention to buy more in the near future.
Food Empire
With the clarity on the impact of its loss due to impairment, I have re-entered the counter in March and April. Currently, it is taking up 6.9% of my portfolio and my average purchase cost is $0.67.
A strong Q1 and revenue is only slightly lower than the record quarter achieved in the last quarter. What really impressed is that the group was able to grow all its market in the past quarter and net profit margin has once again hit 10% mark.
If the group can keep up with the momentum, we should be able to see record revenue and net profit for the year. Mid-term, the establishment of its manufacturing facility in Andhra Pradesh should provide further growth upon its due completion.
Key risk as the group has guided is the fluctuation of foreign currencies. However, I think most of the time the impact is short term and should not affect the group’s long term growth.
B
Raffles Medical Group
Things seem to be picking up in the latest quarter with small increment in both revenue and net profit. Various developments continue to be on track which show good capability of the management team.
An article from Motley Fool on the company shows that the adjusted ROE which exclude the new buildings show that the business is running well.
First purchased in December 2015, and accumulated more every year since then, it now occupies 8.5% of my portfolio at an average cost of $1.35 per share. I will continue to accumulate it when the opportunities arise.
Valuetronics
A very strong year wth revenue up by 25.4% and net profit up by 32.8%. This is the second consecutive years where both top and bottom lines grew by double digits after the group has strategised to move away from mass LED market and to grow automotive segment. Its net profit margin has also improved from 6.8% to 7.2%.
A closer look at the quarterly results confirmed that it is affected by the guidance from Philips Lighting results as written here. And management has guided they are conservative on this which should see a softer numbers in 2019 Q1 with recovery in Q2 and Q3. I have a slight concern with its ICE Q4 revenue which dipped slightly from the previous year but its much lower that Q3. However, it could simply with quarterly fluctuation.
A look at the segmental results again show that the margin from ICE segment is much higher. Hopefully, the management can continue to work on it and clinch more deals with the automotive companies.
Going forward, the group should report lower/flattish performance in the coming quarters. It should be able to maintain its HK$0.20 dividend which translates to a yield of 4% based on its latest price of $0.825. If it is going to keep its interim dividend of HK$0.07, that will increase the yield to 5.5%. Any new deal on the automotive segment and rebound on IOT should see the stock re-rated again.
I recently added some shares at $0.80 when the price plunged. I will just hold on to my current stake and add more only if the price plunges to $0.6+.
UMS
I was alarmed when I saw a drop in 10% revenue. First thought was “Is the up cycle for the semi-conductor over?”
However, reading through the report shows that the key weakness came from Semiconductor Integrated Systems which fell 24% from $24.2 mil to $18.4 mil. This is mitigated by the improvement from its component sales which rose by 12% from $16.7 mil to $18.4 mil.
This translated to a higher profit margin and hence despite overall drop in revenue, net profit has increased marginally. The huge increase in its free cash flow from $6.8 mil to $12 mil further shows that the company is not in distress. Finally, the positive guidance from the chairman and CEO Andy Luong, means that the prospect for the company remains bright for the year.
“We are confident that the wave of IOT, AI and big data growth will stay as smart products and smart cities will continue to flourish. UMS, which is a beneficiary of this favourable uptrend, will therefore forge ahead with its expansion plans and efforts to improve performance.”
Based on above and its strong balance sheet, I am confident that it can sustain its 6 cents dividend.
Over the past week, the price has dropped by more than 10%, primarily due to weaker guidance from Applied Materials for the next quarter. Scanning through the transcript from AMAT , management have guided that 2018 will be a record year, a possible flat 2019 and kept to their target set in 2016 of achieving US$5 EPS by 2020.
I think this might translate to a flattish growth for UMS for the next few years but that should not affect its ability to maintain its 6 cents dividend.
With the above thinking, I have added more at $0.955 and am prepare to add more if it continues to slide below $0.90.
VICOM
VICOM surprised with a small growth in its revenue and net profit for the quarter. Is this marking the turnaround in its vehicle inspection business? In any case, even if there is no upturn, it should show similar performance as last year. With the 90% dividend policy, I am quietly confident that it can give out at least $0.30 dividend for the year. This provides an yield of about 4.9%.
I am not adding more to my cash portfolio but has just bought 1000 shares using CPFIS at $6.08. I believe this investment will do better than the board’s 2.5% interest for the next 5 years.
C
800 Super
Revenue has been pretty stable but net profit dropped again due to re-contracting at lower margin. With the WTE plant started its operating in February, the benefit should come in from next quarter onwards. However, there is no guidance from the latest report. With the ballooning net debt since last quarter, I decided to divest completely and re-channel the cash to US market.
Towards Financial Independence 