Thursday, May 15, 2014

Yongnam reports a marginal loss of S$1.9 Million in 1QFY2014

Yongnam just released their Q1 financial results and as expected, it's a bad report. For the rest of FY2014, Yongnam is still expected to report this kind of financials. Any contracts they are awarded now will only be reflected in their books from the second half of FY2014.

Q1 revenue fell 12.4% which results in a marginal loss of S$1.9 Million. Yes, its a loss. I wrote in an earlier blog post that Yongnam's full year financial results for FY2013 fell by 49.7% as compared to FY2012. This resulted in it share price falling along in tandem as well. The share is trading at a fair value of 24 cents now with NAV at 24.79cents. Why did i invest in this stock when everything is so negative for Yongnam? Yes, for those who did not know, i did initiate a position in this stock when the price fell.

Yongnam has good track records of profits. For the past 5 years from year 2008, profits have been steadily increasing up till 2011. From year 2012, profits started to decrease to a low of only 5.5 Million in 2013.

This may just be a cyclical downturn for Yongnam itself. Yes, i said it may or may not be. No one can be sure of what will happen next or if Yongnam will be able to rise back to where it was previously. But, with its good reputation and a track record of winning contracts, things may start to look good again as Singapore and other parts of Asia are still actively expanding their infrastructure projects.

Moving forward, there are concrete plans which Yongnam has laid out. I quote from it's press release today:

"In 1QFY2014, the Group has secured orders amounting to S$54.3 million, including two new structural steelworks subcontracts for the upcoming Changi International Airport Terminal 4 and the redevelopment of the UIC Building along Shenton Way, Singapore.  
“Outlook for infrastructural developments and commercial projects in Singapore and the region remains positive and the Group continues to actively pursue S$1.2 billion worth of new infrastructural and commercial projects in Singapore, Hong Kong, Macau and the Middle East of which 73%, if awarded, is expected to commence in the second half of FY2014,” added Mr Seow.  
In addition, the Group, together with consortium partners, Changi Airport Planners and Engineers, and JGC Corporation had, on April 22, 2014, re-submitted its proposal for the design, construction, operation and maintenance of the Hanthawaddy International Airport in Myanmar.  
The Group’s order book stood at S$316 million at the end of March 2014." 
Again, do note that any new projects they secure, would only start contributing from the second half of FY2014. The whole FY2014 may still report poor profits but things should start to look good after FY2014 once more contracts are awarded to them. 

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  1. Focus on the cash flows and margins over the last 5-8 years. Have they been consistent? Cash flow is the lifeblood of a business but I don't see many investors even talking about this - most simply focus on the profit and loss statement. Cash flow can tell you a lot about a company and the industry it operates in.....


  2. Hi MW,

    Thanks for the comments. I did look at the CF but did not include it in this post. CF did decrease but its still on the positive side.