This is column is written by @fayewang, InvestingNote’s stock analyst.
Faye is both a fundamental analyst and economist by nature. She is a global thinker who’s open-minded and enjoys learning. If you like this column, please start voting which of these 3 stocks you would like her to write on in her next article! This is your chance to interact with Faye and she will write on the most voted stock!
How to vote: Comment the stock of your choice on InvestingNote by clicking the ‘continue reading’ button below: either Japfa, Yanlord Land or Sheng Siong. The most number of likes/comments by the end of the day will be chosen. It’s that simple!
Voting starts now and ends when the market’s close on today (19 Apr)!
Disclaimer: this article simply provided analysis on stocks from the fundamental perspective, it does not represent any buy/sell recommendation from Investingnote. *All the dollar unit ($) in this article refer to SGD.
Japfa Ltd is a Singapore-based agri-food company. Business of Japfa contains four segments: 1) Animal protein 2) Dairy 3) Consumer food and 4) Others.
Overall performance in recent 5 years:
Japfa enjoy robust growth of both revenue and profit. The company issued their IPO in 2014, and observed solid expansion afterwards. Net profit almost doubled from $91.686m in 2015 to $171.676m in 2016, and almost tripled if traced back to number of $65.086m in 2012 (but the number of net profit is small compared to revenue, thus the curve looks flat in the chart). Japfa has witnessed steadily growing amount of assets and equity, and also observed surge of operating cash flow from $32.957 five years ago to $524.553m in 2016. Based on these data, it is quite obvious that Japfa is an expanding company with rapid growth. In the financial year of 2016, though the net profit margin is 3.916% and less than 5%, Japfa shown their earning potential with a return on equity (ROE) ratio of 20.63% and abundant cash in hands.
Business segments overview:
66.89% of the group revenue comes from animal protein business in Indonesia. Japfa runs their animal protein operation through their 51% share owned listed company -PT Japfa TBK, which holds the popular milk brand greenfields in Indonesia market. Prospects of milk market in Indonesia is optimistic as Indonesians are becoming wealthier thus have increasing demand for milk, while their milk consumption is still lower compared to Malaysians, Thais and Philippines.
More information about Indonesian milk market: https://www.pressreader.com/indonesia/the-…
Japfa operates the dairy business mainly in China and Indonesia. China is also a market with high demand of milk due to the large population and pursue of healthier diet, besides, the quality of milk that produced by local producer is not reliable because of plentiful food safety scandals in recent years. Vietnam market also occupies 12% of Japfa’s revenue.
Japfa stocks has an earning per share (EPS) of 0.097, and a lowest PE ratio of 8.339 in recent 3 years, which is also lower than the average number of agricultural commodities (12.996) and average number of Indonesia market (17.770). Thus we can consider Japfa as an undervalued stock, which means the stock is trading with a discount price. Japfa started to pay dividend with $0.005 per share in 2015, and paid $0.01 per share in 2016. Earning per share doubled from $3.67 cents in 2015 to $6.73 cents in 2016.
Japfa is a growing agriculture firm with prospective and potential market in Indonesia. Their financial performances were robust in recent years and they already built a complete business model to cover the whole value chain.
However, like the most agriculture companies, Japfa’s business is easily affected by seasonal factors, CIMB Securities recently downgrade Japfa because of weaken poultry prices caused by oversupply in both Indonesia and Vietnam in 1Q17, check the research report at https://www.investingnote.com/posts/88813
Overall, there will be temporary headwinds in 2017, but there is high chance that Japfa will recover after the cyclical fluctuation and the price drop now make the stock greater undervalued.
2. $Yanlord Land(Z25)
Yanlord Land Group Limited (Yanlord) is a Singapore-based investment holding company. The Company is a procurer of funds. The Company has 3 segments include: 1) Property development 2) Property investment and 3) Others. Similar to most of the bluechips, Yanlord is traded at their 52-week high price.
Overall performance in recent 5 years:
Within the recent five year, Yanlord has seen an average revenue growth of 28.75%. Net profit has climbed from $357.52m in 2012 to $561.46 in 2016. When solely compared to the result in 2015, Yanlord land gained 75% growth of net profit in 2016. Similar to Japfa, Yanlord experiences rapid expansion and enjoy strong growth, despite the tighten real estate policy and contractionary market in China. With increasing assets and equity, and light burden of debt, the firm kept expanding their construction of superior residential buildings into first and second tier cities in China such as Shanghai, Nanjing, Chengdu and Zhuhai.
Business Segments overview:
In the financial year of 2016, over 95% of the total revenue came from the segment of property development. Hotels, serviced apartments and commercial & office offerings are three integral parts of the property development segments, and they jointly contribute to total segment revenue. In 2017, Yanlord will inject new projects such as an office tower in Tianjin and Hotels in Sanya. At current stage, Yanlord is engage in the redevelopment project that aims at ‘enhancing the cityscape of established cities’. The example of “Xiongan zone” in China has revealed the economic potential of redevelopment in satellite towns around metropolis. Thus, Yanlord is on the right track and need put greater efforts in environmental protection and sustainable growth.