Popular Holdings

Popular just announced its HY results and it was not a pretty sight. While gross margin was maintained, net margin and operating margin has gone down compared to FY2012 figures. Compared to the same period, GP and NP dropped 6% and 42% respectively.

Unless things drastically improved for the 2nd half, its doubtful they will be able to maintained FY 2012 profitability. Operating cash flow for 1H was also negative.

Popular has not declared an interim dividend for 1H2013. The last time it failed to declared an interim dividend was for FY 2002.

[ S O U R C E ]

(Vested)

Right issue on the cards?

(10-12-2012, 10:25 PM)lonewolf Wrote: Popular just announced its HY results and it was not a pretty sight. While gross margin was maintained, net margin and operating margin has gone down compared to FY2012 figures. Compared to the same period, GP and NP dropped 6% and 42% respectively.

Unless things drastically improved for the 2nd half, its doubtful they will be able to maintained FY 2012 profitability. Operating cash flow for 1H was also negative.

Popular has not declared an interim dividend for 1H2013. The last time it failed to declared an interim dividend was for FY 2002.

[ S O U R C E ]

(Vested)

The drop in profit is due to Admin & Other Expenses. Why are they so high this half year? Property development (& trade payables) contributes significantly to the cash outflow. No interim dividend? First time since 2002? Oh no...! [vested since the 10+ cent era, never an exciting counter though....]

The interim dividend of 0.5c costs only about $4m and there is some $100m in cash.

Is there something I do not know?

(18-12-2012, 11:23 PM)orang Wrote: The interim dividend of 0.5c costs only about $4m and there is some $100m in cash.

Is there something I do not know?

I. If I were to think kindly of them, then I'd think there're keeping the cash for both immediate and future planned needs eg. payment of ~$27M for Industrial site (6-Dec Annc) + Additional Property Activities (approved during EGM on 9-Nov).

For comparison purposes of their Cash vs Debts,

Q410 (Apr) : after their last Rights Issue
Cash = $90M
Debts = $17M (NCL) + $11M (CL) = $28M
Cash - Debts = $62M

Q213 (Oct) : Latest
Cash = $119M
Debts = $16M (NCL) + $18M (CL) = $34M
Cash - Debts = $85M
If we further subtract the $27M (Industrial site), then, $58M

So, ya, perhaps that may justify their need to not pay a $4M interim dividend as they may be a bit tight on their cash flow, even more so if they're planning to buy another commercial property (?)... Perhaps someone may want to do a Working Capital analysis to confirm?


II. If I were to think unkindly of them, suddenly cutting the interim dividend without any explanation appears to be a very shareholder-unfriendly move. I'd start to imagine they're trying to drive down the share price so that someone can acquire more of it cheaply....

the inventory impairment is getting larger and larger. they are getting slower and slower to move its inventories. not good signs.

(19-12-2012, 10:08 AM)freedom Wrote: the inventory impairment is getting larger and larger. they are getting slower and slower to move its inventories. not good signs.

In analyzing Popular's latest (31Oct12) inventory position.....
http://info.sgx.com/webcoranncatth.nsf/V...00034EF54/$file/POPULAR1HFY13.pdf?openelement
, I guess we should bear in mind that it is quite natural for the group to buy in more goods ahead of and to support the usual busy Nov/Dec pre-Christmas shopping season, as well as the massive back-to-school textbooks and stationery shopping in Singapore and Malaysia markets in Dec/Jan. We should also bear in mind that as an established and the biggest books and stationey retailer, Popular does enjoy great bargaining power over its suppliers, and I guess quite a lot of the goods purchased can be on a "returnable" basis.

As well, there should be little concern on Popular's cash generating capacity, as its Retail Division remains a solid business franchise in Singapore and Malaysia markets and sells on cash terms, and the textbooks publishing business mainly based in Hong Kong and sells to schools, which are good paymasters.

I thought it is worth noting that yesterday (3Jan13) Popular has just spent $2.05m to buy back a massive 8,366,000 shares from the open-market at an average price of $0.24457/share.....
http://info.sgx.com/webcorannc.nsf/Annou...endocument
Perhaps Popular's management headed by Chou Cheng Ngok - also the controlling shareholder - now believes that buying back shares is a better way to return excess capital/cash to reward shareholders. I guess we should also bear in mind that by rational thinking, buying back shares has the effect of enhancing the intrinsic value of the remaining shares.

i would like to offer an alternative view. although i've been a big supporter of Popular over many years, the latest developments are indeed troubling (well, more like ever since their "diworsification" and distraction into property ventures)

cancelling the dividend and instead using the cash to buyback the shares may be more of an attempt to support the price...for another rights issue? well in a recent sgx announcement, they did hint that the cash from previous rights issue is almost used up. and they do need more cash for developing the new building...sigh....

Moving away from core business and venture into property market is always a concern. It is either the core business is a sunset business or management goes with other's (perceived) easier path.

An e.g. Super Group did move into property market years ago, but the management realized that should focus on their core business and divested all their property business. Mr Market rewarded it with nearly 2-baggers valuation after that.

(not vested)

(04-01-2013, 03:12 PM)CityFarmer Wrote: Moving away from core business and venture into property market is always a concern. It is either the core business is a sunset business or management goes with other's (perceived) easier path.

An e.g. Super Group did move into property market years ago, but the management realized that should focus on their core business and divested all their property business. Mr Market rewarded it with nearly 2-baggers valuation after that.

(not vested)

Or it can be seen as an opportunistic move which has paid off handsomely. Now it would be back to their core business except that now they have a pocketful of cash to reinvest into the core business and add to shareholder value. Who knows where the next opportunity might come from.....just make sure that money is made. Mr Chou seems to me like a shrewd business.