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Koda – Clear surge in furnishing spending trend(guestpost)

Koda – Clear surge in furnishing spending trend(guestpost)

Koda – Clear beneficiary of the surge in home furnishing spending trend (1 Jun 21)

This post was originally posted here. The writer, Ernest Lim is a veteran community member and blogger on InvestingNote, with a username known as @el15 and has 500+ followers.

Since 20 Aug 2020, Avarga has more than doubled from $0.146 to close $0.305 on 1 Jun 2021. Avarga’s strength is likely attributed to its 69.7% stake in Taiga (Taiga is Canada’s largest wholesale distributor of building materials, such as lumber, panels, doors, engineered wood, roofing and others). Taiga’s business has been flourishing due to the strength in home furnishings and the housing market in Canada and US.

By extension, Koda may be another proxy to benefit from the surge in home furnishing spending trend. It is noteworthy that Koda is an Original Design Manufacturer / Original Equipment Manufacturer to its customers in North America. In fact, customers in the North America region constitute approximately 55% of its FY20 revenue. Its forte is in home furniture, and it is possibly the largest dining room furniture exporter in Southeast Asia. Home furnishing seems to be in demand as consumers stay at home and have more disposable income to spend (rather than travel) to improve their homes.

In fact, Koda’s 1HFY21 revenue and net profit jump 16% to US$39.6m and US$4.8m respectively on good demand for furniture.

Given this promising backdrop, it may be timely to take a closer look into Koda. I have the privilege of meeting Mr Joshua Koh, CEO of Commune Lifestyle Pte Ltd and Mr Kenny Zhang, CFO of Koda (“Management”) for a 1-1 discussion over Koda / Commune’s operations and prospects via Zoom. The below is my personal interpretation of my discussion with Koda’s management and my own inferences from Koda’s announcements on SGX.

 Koda’s & Commune’s background

Koda was established in 1972 by Mr Koh Teng Kwee. It started by producing wooden TV and speaker cabinets. Since its inception, Koda has progressed from being an Original Equipment Manufacturer (OEM) to an Original Design Manufacturer (ODM). Its forte is in home furniture, and it is possibly the largest dining room furniture exporter in Southeast Asia.

Besides its ODM business, Koda established Commune Lifestyle Pte Ltd in 2011. This is their in-house brand and managed by the 3rd generation of the founding Koh family. Commune has presence in Singapore, Malaysia, China, Philippines, and Hong Kong. Readers can refer to the respective websites for more information on Koda (click HERE) and Commune (click HERE).

Koda has been listed on SGX since 18 Jan 2002.

 What is so interesting about Koda?

Outlook continues to be bright

Based on 1HFY21 results (financial year ends in June), management continues to see encouraging growth in their export orders and they expect the capacity utilisation rates for our key factories to remain consistently optimal. This is attributed to generally higher demand for furniture arising from work-from-home arrangements.

Their recent proposed acquisition of Land Use Right and a factory building in Long An Province, Vietnam (see announcement dated 25 Mar 2021) to expand their production capacity corroborates the positive momentum that they are seeing in their business.

Margins are likely to be steady amid strong demand

Notwithstanding the rise in costs from timber, fabric, metal frame, foam, and shipping etc, Koda believes that they should be able to maintain their current gross profit margins (“GPM”) of around 30 – 32%. This is because firstly it can pass on such costs to the customers amid strong demand. Secondly, their Commune business has GPM of around 50%. As this segment grows and becomes more significant, it may even be able to raise its overall GPM to above 30 – 32%.

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Patience Is Required For Alibaba And JD.com (guestpost)

Patience Is Required For Alibaba And JD.com (guestpost)

This post was originally posted here. The writer, Brian Halim is a veteran community member and blogger on InvestingNote, with a username known as @3Fs and has 2,000+ followers.

I thought I’ll pen down my thoughts after receiving a number of emails this week from various sources asking for guidance on two big China cap names – Alibaba and JD.com – both of which have seen shares plummeting each day for the past few consecutive weeks.

Many readers would also know that I own Alibaba shares from my last monthly update and have also recently written a piece on JD analysis so it’s something which I’ll walk the talk.

Alibaba Group Holding Ltd (NYSE: Baba)

alibaba-image-blog

Let’s start with Baba first.

This is probably the most hated large cap company right now in the entire planet.

The entire saga started when the intention to list Ant IPO was shelved and the State Administration for Market Regulators went to investigate the entire company’s holding structure.

Since then, the State of Administration has concluded by fining the company US$2.8billion – which the company chose to take in the Q4 FY2021 report announced last night.

The entire saga has shed the company 37% (more than 1/3) of its market cap from the peak – which in my opinion is a bit overdone. The RSI indicator confirmed the same by showing that the counter is currently in oversold territory.

If we look at the results announced yesterday, total revenue for the quarter was RMB 717 billion, an increase of 41% year on year.

The growth was driven by robust revenue growth of the China commerce retail business (Taobao, Tmall) and the continued growth of its cloud computing business.

Total adjusted EBITDA was RMB 170 billion, which is an increase of 24% year on year. There was the one-off adjustment from the anti-monopoly fine which was taken in the quarter, so it pushed the net comprehensive income for the quarter to negative loss territory.

Cash position remains solid at RMB 479 million with free cash flow coming in strongly at 32% to RMB 173 million.

During the conference call held yesterday, management has reiterated its intention to continue investing in R&D and also new seed of businesses such as Taobao Deals (which aims for the lowest of the market segment tiers), Taobao Grocery, Freshippo supermarket (which is the community marketplace business) and new features on the core platform such as Taobao Live and short-form video. The company is also enhancing its logistics arms, CaiNiao to give its competitors such as JD a good run for their money.

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Upcoming: LIVE Market Commentary

Upcoming: LIVE Market Commentary

Now that Biden is slated to take up presidency come January 2021, Trump is not conceding defeat yet.

What does this mean for stock markets around the world?

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It’s time to join us for this upcoming LIVE Market Commentary featuring the Top Trader of the SG Active Trading Tournament 2020!

The Top Trader, TheBearProwl (Aaron Sim) had 28.14% total portfolio returns and won the tournament, beating 2,000 other participants.

He was also 2018’s SGX Bull Charge Stock Challenge Grand Winner.

Joining him on this panel is Dan Chang, our veteran community member. He is an investment specialist, and trading representative from PhillipCapital.

Get some interesting insights and updates on the current market conditions across SG, HK and US from their perspectives.

You don’t want to miss this session!

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US Presidential Election 2020 – How It Affects Malaysia (Guest Post)

US Presidential Election 2020 – How It Affects Malaysia (Guest Post)

US Election is once every 4 years, but how does it impact the markets?
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This post was originally posted here. The contributor to this article,@Denise is one of our many community members on InvestingNote.

update: Joe Biden wins the Presidency with 290 seats?

In the meanwhile, it could still be a period of volatility as the markets wait for a smooth transition (if there even is). So even though it seems like the President of the US has alr been highly-likely decided, it should be noted that there are still various ways the US Election can be contested.

Nevertheless, here are some macroeconomics principles that you’d be keen to know of:

[After all, this won’t be the last Presidential Election because there will always be another one every 4 years. Hence, the same factors would still apply.]

Just a quick backdrop:

On August 31st, 1957, diplomatic relations between Malaysia and the US were established when the US elevated its Consulate General in Kuala Lumpur to the status of the Embassy.

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Join us for this weekly LIVE Market Commentary!

Join us for this weekly LIVE Market Commentary!

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Get exclusive insights on what’s new in the Markets from our special guests:
✔ Ella Lan (CFA), who is the Chief Market Strategist of Everest Fortune Group.
✔ Dan Chang, investment specialist, trading representative from PhillipCapital and veteran community member. @dAnccs
✔ Alvin Li, Vice President of Societe Generale.
 
Get some interesting insights and updates on the current market conditions.

InvestingNote is the first and largest social network for investors in Singapore. Find out more about us here.

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Also, join our telegram channel here: t.me/investingnoteofficial

We’re here to keep you in touch with the latest investing & stock-related news, happenings, and updates!

Thursday 11 June 12PM: LIVE Market Commentary with Terence Wong

Thursday 11 June 12PM: LIVE Market Commentary with Terence Wong

The market is rallying! What is happening and how long will it last?

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Join Azure Capital’s CEO Terence Wong, who will share his updates & views as investment professional with more than 20 years of experience.

Terence has invited CEO of APAC Realty $APAC Realty(CLN.SI) Jack Chua to join him as a special guest. The property agency business has been hit by Circuit Breaker. Hear how Jack is rallying his agents through these challenging times. Is it a good time to enter the stock now? Take this chance to ask Jack anything. He may even give you a few tips on what good properties there are out there.

Register for this webinar now!

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Watch the previous webinars here:
May 17: https://www.youtube.com/watch?v=g7M8WgSpzAU…
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Apr 20: https://youtu.be/oc47JTU2wwo…
Mar 30: https://www.youtube.com/watch?v=9BuhdzhZdRY&t=438s…
Mar 16: https://www.youtube.com/watch?v=zD9VXxDGNZU&t=1575s…


InvestingNote is the first and largest social network for investors in Singapore. Find out more about us here.

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Also, join our telegram channel here: t.me/investingnoteofficial

We’re here to keep you in touch with the latest investing & stock-related news, happenings and updates!

ARA HTrust – Most Oversold Stock in Singapore with 10% Estimated Dividend Yield (Guest Post)

ARA HTrust – Most Oversold Stock in Singapore with 10% Estimated Dividend Yield (Guest Post)

ARA HTrust comes out to be the most oversold among Singapore listed stocks yesterday with a RSI of 8.2. This is its most oversold level since listing. ARA HTrust has tumbled approximately 22% from an intraday high of US$0.900 to close at US$0.705 yesterday, which is the lowest close since IPO.

This post was originally posted here. The writer, Ernest Lim is a veteran community member and blogger on InvestingNote, with username known as el15 and 400 followers.

Yesterday evening, as I run my stock screening via Bloomberg, ARA HTrust comes out to be the most oversold among Singapore listed stocks yesterday with a RSI of 8.2. This is its most oversold level since listing. ARA HTrust has tumbled approximately 22% from an intraday high of US$0.900 to close at US$0.705 yesterday, which is the lowest close since IPO.

Why does it attract my attention? Read on for more.

 

A) Chart – Selling pressures may ease as oversold pressures escalate

Based on Chart 1 below, ARA HTrust is entrenched in a downtrend. All the exponential moving averages (“EMAs”) are trending lower with death cross formations. However, indicators such as RSI and MACD are near, or at all time oversold levels. For example, RSI closes at 8.2 yesterday, all time low since IPO. At 8.2, this is also extremely low on an absolute basis. Although there is no rule to stipulate that RSI cannot go below 8.2, suffice to say that, on the balance of probabilities, near term downside may be capped as oversold pressures build. In addition, ARA HTrust has been bouncing around US$0.700 and this support level looks good on both chart and absolute basis (typically stocks find support on a round number).

Near term supports: US$0.700 / 0.675 / 0.650

Near term resistances: US$0.735 / 0.745 – 0.750 / 0.775

Chart 1: ARA HTrust has fallen 22% since its record high US$0.900
https://s3-ap-southeast-1.amazonaws.com/investingnote-production-webbucket/attachments/6b3ca741312c1560d88c9727ff14446c19b6bd81.png?1583393464

Source: InvestingNote 5 Mar 2020

B) Analysts are positive with target prices ranging from US$0.95-1.25

Based on Figure 1 below, average analyst target is around $1.10. Analysts estimate that ARA HTrust may distribute US$0.070 – 0.074 / share as dividends in FY20F. If I conservatively use US$0.07 as the estimated dividends per share to be distributed in FY20F, this works out to an estimated dividend yield of around 9.9% given the closing price of US$0.705 yesterday. All in, total potential return amounts to around 66%!

Figure 1: Average analyst target $1.10; total potential return 66%!
https://s3-ap-southeast-1.amazonaws.com/investingnote-production-webbucket/attachments/8957fb0bf1ad21d14b0929d5745c42c3ed0cc0b6.gif?1583393465

Source: Bloomberg 5 Mar 20

C) Other noteworthy points

ARA HTrust has completed the acquisition of its three new Marriott acquisitions on 17 Jan 2020 and this is likely to contribute to their net property income. In addition, ARA HTrust has set up S$800m debt program in Jan 2020. According to KGI’s research report, they cited that ARA HTrust’s management intends to acquire more Marriott or Hilton hotels.

Risks

As with most companies, there are numerous risks that ARA HTrust faces. Just to cite a couple of risk factors (readers can refer to the analyst reports HERE for more risks that ARA HTrust faces)

a) Macro outlook has deteriorated

Given the supply headwinds, compounded by COVID-19 which is likely to have an impact on domestic and overseas travel, the macro outlook for ARA HTrust has deteriorated. It is noteworthy that since news of COVID-19 spreading in countries like South Korea broke out on the weekend of 22–23 Feb, ARA HTrust’s share price has slumped 18% from US$0.860 on 21 Feb to close US$0.705 on 4 Mar 2020. Although part of the decline can be attributed to its weaker than expected results, I think part of the decline may also be attributed to the spread and the fear of COVID-19 worsening in U.S. and overseas resulting in a drop in domestic and overseas travel. If this worsens further, it may have an adverse impact on current and future net property income and subsequently distributions.

b) Illiquidity is an issue

Average 30-day volume for ARA HTrust is merely 320K shares per day. This is an illiquid stock where it is not easy to enter or exit with a meaningful position. Furthermore, it may be subject to large price movements should there be sudden buying or selling interest.

c) Other risks include U.S. tax changes; forex risks etc

Other risks include U.S. tax changes and forex risks as ARA HTrust’s earnings and distributions are denominated in US$.

Conclusion

ARA HTrust captures my attention due to its extremely oversold nature, coupled with an attractive potential capital upside and good dividend yields especially in current low interest rate environment. However, it is noteworthy that its business faces certain headwinds. Illiquidity is also an issue.

Notwithstanding the above, it is noteworthy that I am neither familiar with ARA HTrust’s fundamentals, nor do I have direct access to management (as my main basis is more on its oversold nature). Readers who are interested in ARA HTrust should view ARA HTrust’s announcements on SGX or on their website. Furthermore, you can view the analyst reports HERE.

P.S: I have highlighted to my clients on ARA HTrust past two days where it is trading around US$0.700-0.705. I am vested in this stock for trading purpose.

Thanks for reading.

Once again, this article is a guest post and was originally posted on el15s profile on InvestingNote. 

Become a part of our community and also see what other investors are saying about the current market right now: (click on the view now button)

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