A-Smart Holdings (formerly: Xpress Holdings)

[Musicwhiz]

The company financial is ugly...

I guess the first thing we should look at when we assess a business is whether it has a competitive moat. This can be evident from the financials (i.e. margins and returns), but sometimes merely looking at an industry and whether it has low/high barriers to entry makes it easy to sift out the wheat from the chaff.

For Xpress' case, I recall it was a major printer for Annual Reports of listed companies - but many companies have now since "gone green" and started using CD-ROMs for soft copy annual reports, along with a 1-3 page summary of the key financials as well as the Chairman's Statement or MD&A. Such a shift in demand, along with the reduced used of print media and the introduction of online media sources, would definitely be permanently detrimental to Xpress' business.

The MD&A taken from the latest financials (year ended July 31, 2014) tells a sorry tale:-

"Due to the rapidly changing trends in the overall print industry and the rise of new media, traditional commercial printing businesses are facing immense pressure to transform to cope with the uncertain business conditions facing the industry.
This adverse industry trend is exacerbated by the difficult business environment in which the Group operates. The impact of these challenges can be seen in the growing number of small, medium and big printers closing down while those remaining in operation had to face a sharp decline in business, especially in recent months. This gave rise to excess capacity thus leading to aggressive price wars and fierce competition among printers. As a result, the Group has experienced significant downward pressure on business volume."

It also seems strange that this new owner (who is taking a 31% stake in the Company) is running a company which sells sauces and condiments. Not very sure how that gels with knowledge in running a printing firm!

I feel sorry for the owners though - they have had to pledge their personal assets as collateral for a loan for a failing business, meaning there is a chance they may lose a substantial chunk of their assets.