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15-03-2016, 09:08 PM
Dairy Farm has released its end-year report for 2015 recently. Here is my view on the company.
The gross margin remains pretty stable at about 29-30%, but selling and distribution expense, a key expense has increased in the last few years. The expense has grown faster than the revenue. Sales increased by 7-8% from FY2013 to FY2015, while the expense increased more than 12% over the same period. The EBITDA has gone down from US$747 million in FY2013, to US$643 million in FY2015, a reduction of about -15%.
The net margin has been eroding since FY2013. The overall net profit margin has gone down from 4.6% in FY2013, to 3.8% in FY2015. The down-trend has no sign of slowing down, IMO
The company asset turnover, with definition of sales over total asset, is slightly below at 2.3x in FY2015, comparing with 2.6x in FY2013. Factoring the recent major acquisitions, it has shown that the company is able to push sales as fast as before, IMO.
One major change in the company fundamentals, is the recent acquisitions. The price tag of US$910 million acquisition of YongHui, has turned the company from a net cash position of about US$470 million in FY2014, to a net debt of US$480 million in FY2015. The balance sheet has worsened.
The partnership with YongHui and JD.com with a model of Online-to-Offline commerce (O2O) has yet produced any positive result. YongHui’s earning in 2015 has eroded due to competition, with lower margin.
The gross margin and asset turnover remain relatively stable, indicating that the company operating processes remains sound albeit weakening. Annual dividend payout has been reduced from 23 US cents to 20 US cents, a reduction of about 15%, comparable to EPS reduction in FY2015.
How about the valuation? The EBITDA in FY2015, is US$643 million. The quality of the company has been weakened by negative outlook in profitability, reducing dividend payout, and a poorer balance sheet. I reckon, an EV/EBITDA of 12 is suitable. The net debt is US$482 million, with a negligible minority interest, the fair price is estimated as around US$5.0-US$5.5 based on current outstanding 1352 million shares. The dividend yield, based on dividend of US 20 cents per share, is about 3.6%-4.0%.
As a comparison, Sheng Siong is having a EV/EBITDA of 13-14, due to the good profitability outlook, stronger balance sheet, and growing dividend payout. The dividend yield, based on dividend of 3.5 cents per share, is about 4.1%.
All comments are welcomed.
(not vested, but review together with my review on Sheng Siong)
The gross margin remains pretty stable at about 29-30%, but selling and distribution expense, a key expense has increased in the last few years. The expense has grown faster than the revenue. Sales increased by 7-8% from FY2013 to FY2015, while the expense increased more than 12% over the same period. The EBITDA has gone down from US$747 million in FY2013, to US$643 million in FY2015, a reduction of about -15%.
The net margin has been eroding since FY2013. The overall net profit margin has gone down from 4.6% in FY2013, to 3.8% in FY2015. The down-trend has no sign of slowing down, IMO
The company asset turnover, with definition of sales over total asset, is slightly below at 2.3x in FY2015, comparing with 2.6x in FY2013. Factoring the recent major acquisitions, it has shown that the company is able to push sales as fast as before, IMO.
One major change in the company fundamentals, is the recent acquisitions. The price tag of US$910 million acquisition of YongHui, has turned the company from a net cash position of about US$470 million in FY2014, to a net debt of US$480 million in FY2015. The balance sheet has worsened.
The partnership with YongHui and JD.com with a model of Online-to-Offline commerce (O2O) has yet produced any positive result. YongHui’s earning in 2015 has eroded due to competition, with lower margin.
The gross margin and asset turnover remain relatively stable, indicating that the company operating processes remains sound albeit weakening. Annual dividend payout has been reduced from 23 US cents to 20 US cents, a reduction of about 15%, comparable to EPS reduction in FY2015.
How about the valuation? The EBITDA in FY2015, is US$643 million. The quality of the company has been weakened by negative outlook in profitability, reducing dividend payout, and a poorer balance sheet. I reckon, an EV/EBITDA of 12 is suitable. The net debt is US$482 million, with a negligible minority interest, the fair price is estimated as around US$5.0-US$5.5 based on current outstanding 1352 million shares. The dividend yield, based on dividend of US 20 cents per share, is about 3.6%-4.0%.
As a comparison, Sheng Siong is having a EV/EBITDA of 13-14, due to the good profitability outlook, stronger balance sheet, and growing dividend payout. The dividend yield, based on dividend of 3.5 cents per share, is about 4.1%.
All comments are welcomed.
(not vested, but review together with my review on Sheng Siong)
“夏则资皮，冬则资纱，旱则资船，水则资车” - 范蠡