While this stock has no near term catalyst, its gross profit margins have been increasing at each half year reporting (37.5% for 1H FY 2024)
In its recent half year reporting it has been able to record higher gross margins on the back of a higher revenue as well.
Adding to that
Nan Pao has shown growth of around 12% from (Apr 24 - Sept 24 vs Apr 23 - Sept 23)
Greco has shown growth of around 17% as well
Yue Yuen's Manufacturing business went from -0.10% YTD Change in March 2024 to 9% YTD Change in September 2024
The above might indicate that the fall in revenue is likely to stop this upcoming half year and might even show revenue gain(Though i feel that overall revenue compared to Last FY should be within the range of -10 to +10% due to 1H Revenue being lower YOY)
If the company is able to execute similar 1H Margins or better, it would likely result in a higher net profit. With the company being a keen dividends payer, this would translate to better yield
The interesting mid-term will be whether margins can improve further with the new factory. 74 million already put in and the ppe+rights use of asset as of March 2024 is only 121 million. As such, it definitely is quite a huge capex / project.
Dont like that they dont comment on declining revenue, since last year no word on why. Also what they plan with the new plant in Indonesia without demand is not clear. Their communication is poor, I guess that may be one reason why they look undervalued.
Thank you for the great write up. One quick question: do you know why they have debt ? They have a lot of cash but company accounts show it is not held at holdco level. Any colour on recent decline in turnover would also be helpful. Thank you
1. That's the nature of doing business in Southeast Asia. Capital control in place so you can't move capital quickly. The optimal case of course is net zero debt. Also sometimes companies have loans just to maintain relationships with banks.
2. It's really just ebb and flows. It's dependent on footwear sales and footwear, like most industries, is cyclical. Secondly keep in mind that's financial year 9/30/2023, this year should be decent as there were Copa America, Euro Cup, and Olympics. But either way I am not too overly concerning.
If you use those aggregator websites long enough, you will see they often get wrong. I checked the annual reports and I have the right numbers for weighted average shares outstanding. Aggregator websites are useful for a quick glance but don't bet the house.
Nice Find.
While this stock has no near term catalyst, its gross profit margins have been increasing at each half year reporting (37.5% for 1H FY 2024)
In its recent half year reporting it has been able to record higher gross margins on the back of a higher revenue as well.
Adding to that
Nan Pao has shown growth of around 12% from (Apr 24 - Sept 24 vs Apr 23 - Sept 23)
Greco has shown growth of around 17% as well
Yue Yuen's Manufacturing business went from -0.10% YTD Change in March 2024 to 9% YTD Change in September 2024
The above might indicate that the fall in revenue is likely to stop this upcoming half year and might even show revenue gain(Though i feel that overall revenue compared to Last FY should be within the range of -10 to +10% due to 1H Revenue being lower YOY)
If the company is able to execute similar 1H Margins or better, it would likely result in a higher net profit. With the company being a keen dividends payer, this would translate to better yield
The interesting mid-term will be whether margins can improve further with the new factory. 74 million already put in and the ppe+rights use of asset as of March 2024 is only 121 million. As such, it definitely is quite a huge capex / project.
Dont like that they dont comment on declining revenue, since last year no word on why. Also what they plan with the new plant in Indonesia without demand is not clear. Their communication is poor, I guess that may be one reason why they look undervalued.
it's ebb and flows and that's probably not much to comment on. Brokerage firms have some read across on footwear ODMs but I don't bother read them.
Thanks for sharing. I found niche players very interesting. Two questions --
1. Does Nike or Adidas have a say about choice of adhesive? Who's supplying the other two giants (华利 & 丰泰) ?
2. Have you talked to the management about future dividends payout?
Thank you for the great write up. One quick question: do you know why they have debt ? They have a lot of cash but company accounts show it is not held at holdco level. Any colour on recent decline in turnover would also be helpful. Thank you
hello friend,
1. That's the nature of doing business in Southeast Asia. Capital control in place so you can't move capital quickly. The optimal case of course is net zero debt. Also sometimes companies have loans just to maintain relationships with banks.
2. It's really just ebb and flows. It's dependent on footwear sales and footwear, like most industries, is cyclical. Secondly keep in mind that's financial year 9/30/2023, this year should be decent as there were Copa America, Euro Cup, and Olympics. But either way I am not too overly concerning.
Thank you for the thorough review of this (very much) under-the-rader company.
Just did some review of its financials and they look great. I use the unclestock.com software.
What puzzles me a bit is the "number of shares outstanding" they got.
looking at the time series from 2016 to 2023 (8 years) I get the following figures:
634.44M 631.77M 632.00M 1.08B 563.35M 563.35M 1.03B 1.02B.
How that can be explained? Splits and reverse splits?
If you use those aggregator websites long enough, you will see they often get wrong. I checked the annual reports and I have the right numbers for weighted average shares outstanding. Aggregator websites are useful for a quick glance but don't bet the house.