Auric Pacific Group

[getrich]

Auric Pacific’s net profit dips 30.4% to $1.6m

This is despite the impressive results of its businesses.

Despite overall notable performance by its businesses, Auric Pacific Group Limited’s net profit dropped 30.4% to $1.6 million in 2Q16 against its $2.3 million earnings in the same period a year ago.

The investment holding company said in its statement that PBT was $7.1 million excluding impairment loss on unquoted investment funds of $5.6 million. This exceeded last year’s PBT of the same period at $4.9 million.

Auric Pacific attributed the performance to operating profits of various divisions including wholesale and distribution, and manufacturing, as well as lower operating loss of its Edmontor group.

“In addition, the Group avoided losses sustained by its loss making business in Malaysia and also certain outlets in Singapore as they were rationalised last year. Food Junction Group delivered higher operating profit in Q2 2016 over the corresponding quarter in 2015 by S$2.2 million as the Foodcourt segment turned profitable while the restaurant segment reduced its losses. The closure of under-performing restaurant outlets last year prevented erosion of the better performance achieved during the quarter,” Auric Pacific added.

As at 30 June 2016, the Group’s total equity stood at S$165.2 million, which was S$4.4 million higher than the position as at 31 December 2015, Auric Pacific said.

[dydx]

Auric Pacific’s net profit dips 30.4% to $1.6m

This is despite the impressive results of its businesses.

Despite overall notable performance by its businesses, Auric Pacific Group Limited’s net profit dropped 30.4% to $1.6 million in 2Q16 against its $2.3 million earnings in the same period a year ago.

The investment holding company said in its statement that PBT was $7.1 million excluding impairment loss on unquoted investment funds of $5.6 million. This exceeded last year’s PBT of the same period at $4.9 million.

Excluding the $5.6m impairment loss on unquoted investment funds, 2Q's PBT would have been $7.1m. We also know most of Auric's loss-making or under-performing businesses/outlets (mainly under Edmontor Group/Delifrance and Food Junction Group) have been cut by now. So it appears that 2H's PBT could well hit $15.0m, assuming no more major provisions on PPE or investments.

I suppose it could be because of the above trend that selective buying interest on this stock continued today and Mr Market actually bought it up as high as $1.105 intra-day.

[dydx]

In the latest disclosures of ED Dr Andy Adhiwana's open-market purchases on 11Aug16 and 12Aug16.....
http://infopub.sgx.com/FileOpen/_eFORM1V...eID=417592
he actually paid as high as $1.03/share, and has now raised his personal beneficial interest held under his private investment company Goldstream Capital Limited (itself a wholly-owned subsidiary of Bravado International Ltd), to 26.5% (33,306,511 shares).

Based on Auric Pacific's last done share price of $1.06, Dr Andy's stake is now worth a cool $35.3m! I wonder where does he get his money to buy the shares?

Dr Andy Adhiwana has been buying more shares from the open-market.....
http://infopub.sgx.com/FileOpen/_eFORM1V...eID=420456
In his 2 recent purchases announced last evening (6Sep16), on 1Sep16 Dr Andy added 234.4k shares and paid an average price of $1.1492/share, and on 2Sep16 (last Fri) he added another 15k shares at $1.15/share.

The man is now the beneficial owner of a 26.89% interest (33,794,711 shares) in Auric Pacific!

No wonder Auric Pacific's share price - which closed yesterday (6Sep16, Tue) at another recent high of $1.17 - has continued to rise!

[holymage]

Thank you dydx for sharing this undervalued company.
Despite a 63% increase in share price from $0.71 to $1.16, personally I believe there is still some upside to Auric Pacific.
One can simply do a comparison with that of their competitor - QAF Limited (P/E ttm = 10.7, excluding one-off sale of equity).

History:
Auric Pacific has been value destroying since 2002, having a diversification strategy, and even dabbled into security investment, property investment and even fund investment! It is little surprise that some investors will be bias against them. However, ever since Ms Saw Phaik Hwa came onboard, she steered the ship towards a gradual turnaround.

Cash:
Auric Pacific has a net cash of 69m. So the rest of Auric Pacific is worth 77m. In addition, this is "real cash", as current management seems to have halt their capital destructive adventures.

Wholesale and Distribution:
EBIT tends to be stable around 10-11m (slightly lower in 2015, due to depreciating Ringgit). Assume a QAF's trading division P/E of 8, the wholesale division is worth 80m. Either Auric is more efficient, has better distribution channels or better portfolio brands, as Auric's EBIT margin of 4% is higher than that QAF of 3.5%.

Manufacturing:
This is Auric's crown jewel - SCS, buttercup, sunshine. It can be seen that although revenue has been decline, EBIT margin however has increase from 11% to 21% in just 4 years. The figures showed that management has successfully driven better cost management and operational efficiency. QAF's bakery on the other hand has an EBIT margin of 11.6%. This could possibly be due to QAF's operating expenses of retail outlets in Philippines and Australia. Assume a similar market P/E of 10, the manufacturing division is worth 110m.
This is the main growth engine of Auric Pacific. There is still potential growth in this division, either by growing market share and new product launches (extra fine wholemeal bread, frozen pizzas etc). Auric has lagged behind Gardenia's product diversity for years, and has finally awake (just check the different bread favours in online groceries).

Food Retail:
The most worrisome of Auric's business divisions. Apparently, the operating environment is too competitive or management’s forte is not in this sector. Auric made the tough decision and closed down Delifrance Malaysia outlets, however there is still marginal losses in Singapore and Hong Kong outlets. With respect to bakeries and cafes, they are still bleeding money, abeit at a lower losses. Would be interesting to see profit being eke out.

Food Court:
Bottom line turned black since 2015, and with two restaurants left operating, medzs and lippo chiuchow.


Base on QAF's current undemanding valuation, Auric Pacific's “cash + wholesale + distribution” is worth 259m, more than current market cap of 146m. This is excluding the food court and food retail divisions.

What gives me the most confidence is, Dr Andy Adhiwana continues to eat his own cooking (from 22% to 27%), with latest purchase at $1.15/share. In his own words, apparently he feels that the Company has yet to reach its full potential. The following article describes the changes Dr AA made with respect to policy deployment, organization structure and strategic business strategy.

http://www.asianentrepreneur.org/dr-andy...c-pacific/


What I don't understand is, why the market allocate comparatively low p/e ratio for QAF businesses. Consumer goods typically command p/e from 13-20. Currently, consumer goods manufacturers like Kellog, Nestle Malaysia, Super, Apollo Food have p/e of 20+; and food distributors like Core-Mark, SpartanNash, United Natural Foods have p/e of 15-20+.
Is there something that I am missing?

[dydx]

Based on the unusually high volume transacted so far today of 339 lots, Auric Pacific appears to have convincingly breached the psychologically important $1.20 mark. As indicated by the much longer 'BUY' queue, it appears that there is growing interest in this counter.

[ngcheeki]

Share price of Auric pacific is probably boosted by the following initiation analyst report from CIMB today.

https://brokingrfs.cimb.com/k88wXAj6TxsD...3syYA2.pdf

[dydx]

Share price of Auric pacific is probably boosted by the following initiation analyst report from CIMB today.

https://brokingrfs.cimb.com/k88wXAj6TxsD...3syYA2.pdf

The CIMB report is very well written and contains a lot of details. CIMB's initiation target price of $1.69 appears conservative, bearing in mind that in 1997 Lippo Group actually paid $2.42/share in a GO for its initial 50+% stake in Auric Pacific.

[BlueKelah]

Share price of Auric pacific is probably boosted by the following initiation analyst report from CIMB today.

https://brokingrfs.cimb.com/k88wXAj6TxsD...3syYA2.pdf

The CIMB report is very well written and contains a lot of details. CIMB's initiation target price of $1.69 appears conservative, bearing in mind that in 1997 Lippo Group actually paid $2.42/share in a GO for its initial 50+% stake in Auric Pacific.

And we all know what happened after that in 1997 LOL...

[testwrite]

Share price of Auric pacific is probably boosted by the following initiation analyst report from CIMB today.

https://brokingrfs.cimb.com/k88wXAj6TxsD...3syYA2.pdf

The CIMB report is very well written and contains a lot of details. CIMB's initiation target price of $1.69 appears conservative, bearing in mind that in 1997 Lippo Group actually paid $2.42/share in a GO for its initial 50+% stake in Auric Pacific.

And we all know what happened after that in 1997 LOL...

sorry what happen after 2007?

my thoughts

even if the CEO start buying it share, does not mean anything much, just like they buy food junction and delifrance, in the end, lost big time

their equity was 266 million in 2007, after 10 years now, it is 160 million now

lost 40%  in 10 years, maybe it is picking up now with new CEO

[dydx]

According to p16 of the CIMB report, the Riady Family first secured control of Auric Pacific in 1997 through using Lippo China Resources Ltd ("LCR")(listed on SEHK, and a member of the Lippo group of companies) to launch a GO at $2.42/share. LCR now holds a controlling 49.28% stake in Auric Pacific.

Under Lippo group, Auric Pacific had since 2000 made various new investments and acquisitions, which are summarised in p16 through p18 in the CIMB report. Unfortunately, some of them - notably Delifrance (2007), some tech companies (2000 to 2010), and Food Junction's aggressive diversification into new restaurants (2008 to 2012) - had been disastrous, and contributed to large losses over the ensuring years.

On 26Nov14, Dr Steven Riady transferred a 21.88% block of Auric Pacific shares (held under his personal interest) to his son-in-law, Dr Adhiwana. Dr Adhiwana has since raised his stake in Auric Pacific to the latest 26.89% (as at 2Sep16) through active open-market purchases at increasing prices (ranging from S$0.72 to S$1.15)..... http://auric.listedcompany.com/newsroom/...7BG8.1.pdf

This time round, it is Dr Adhiwana (presumably backed by the Riady Family's private resources) as the incumbent CEO who is buying more Auric Pacific shares from the open-market and guiding the share price upwards. While we do not know for sure what is the real intention of Dr Adhiwana and the Riady Family, the fact that the 2 now already controlling a total 76.17% stake in Auric Pacific is pointing towards a privatisation move would soon become an achievable possibility for them. If this were to happen, tactically it would be more advantageous for them to do it early than later, as Auric Pacific's businesses and profitability are recovering nicely.