Portfolio review: Q1 2019 results

All five Evergreen stocks (iFAST, Kingsmen, SOG, China Aviation Oil and HRNet) reported poor results for the first quarter of 2019 but I’m sticking with them. These companies have a history of producing great results and I’m giving them 2-3 years more before I consider selling.

iFAST

Revenue and net profit declined because of “a decrease in front-end commission income resulting from a significant drop in customers’ investment subscription in unit trusts”. This was one of the key risks mentioned in my thesis. iFAST is one of the lowest cost investment platforms in Singapore and Asia and should benefit from network effects and the tailwinds of a rising Asian middle class. I’m confident that results will improve in the next few quarters. iFAST has a 2.9% dividend yield and has the highest valuations within my portfolio but I think it’s worth paying up for the company’s growing moat.

Kingsmen

Revenue increased but net profit fell year on year. Ouche! Kingsmen revenue has been growing in the last 2 quarters because of new retail supply in China and Singapore but start-up costs related to NERF and higher taxes has been dragging down earnings. The new NERF Marina Square attraction is opening up in 1 October 2019. There will be minimal earnings contributions in 2019 and 2020 from the Marina Square attraction but a successful outcome will lead to more attractions in Southeast Asia and recurring earnings from franchise fees. If NERF Marina Square is still posting losses in 2020, I will consider selling my shares. The cheap valuation of the company was one of the core pillars of my thesis so I’m happy to hold on to my position. Kingsmen is a services company trading at 0.8x price to book and is offering a 4.9% dividend yield. The dividend works out to around 60% of 2018 earnings so it should be sustainable.

Singapore O&G (SOG)

Revenue increased but net profit declined because of falling dermatology contributions. SOG has hired a new dermatologist so let’s give the company some time to turn this segment around.  SOG is trading at 19x trailing earings and is offering a juicy 4.7% yield.

China Aviation Oil (CAO)

Revenue fell 9% year on year while net profit fell 2% year on year. Earnings tend to be volatile for oil trading companies so I’m happy to hold on to CAO. As I mentioned in my earlier thesis, only 10% of Chinese hold a passport so CAO should continue to grow along with China’s outbound air traffic. This is still a undervalued dividend stock. The dividend yield is 3.6%.

HRNet

Revenue and core net profit fell year on year because of a softer Singapore flexible staffing market. The whole point of their IPO was to expand into the North Asia market to avoid depending so heavily on Singapore so we have to be patient as they execute on this strategy.  HRNet’s dividend yield is 3.9%.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s