Saturday, April 25, 2009

Pfood vs Yurun

Both are similar:
  • In the same business, slaughtering pigs and processing meat
  • Vying for number 2 and 3 in the China pork market
  • Similar business model and financial statements (i.e.: low debt, low capex business with high turnover and working capital, COGS make up > 80% of costs).
  • Both affected by the same events: the pork shortage starting 1H06 until end 07, and the current ongoing recovery.
Some differences:
  • Yurun concentrated on selling through third parties (e.g.: supermarkets, hotels) after listing in 1H06. Pfood runs its own stores - it has just started mentioning that it will look to third party distributors in its 2008 AR.

Yurun listed in Oct 05 on HKEX (announcements here). HKEX makes it a hell of a lot easier to find documents than SGX.


(All figures in RMB millions)

YOY Sales:

YOY Operating Margins:

Half Yearly Margins during the FY06-07 pig shortage:

Why did Yurun's 2H08 operating profit drop so much? It was due to increases in admin and distribution expenses, decreases in other income and finance income ($HK):

In their FY08 prelim report, they say:
"During [FY08], the operating expenses of the Group were... up 59.2% ... The increase was mainly attributable to higher transportation costs resulting from the increase in fuel costs, combined with an increase in advertising expenses and management costs due to the increase in staff number".

  • Yurun started from a smaller base, but expanded faster and surpassed Pfood in sales in 08.
  • Yurun has higher gross margin. This may be due to better branding or better supplier network/location.
  • Pfood has higher operating margin however. It is more efficient.
  • Yurun has announced aggressive expansion plans for the future. Plans to double capacity to 30m head by 2010 (currently at end 08 is 18m). Financed by cash and debt. Yurun has previously expanded this fast in previous years. Horizontal integration. Market share and scale.
  • Pfood has announced plans to enter pig farming and be able to meet all its raw material needs within 5 years. Vertical integration. Efficiency.
Currently the 2 companies are similar with different characteristics. In future, they will have different profiles.

Still need to look through these before making a descision.
  • Yurun's cashflow statements (working capital) and footnotes.
  • Product mix (LTMP vs HTMP) between the two companies - can this account for the differences in margins?

Sunday, April 19, 2009

RMG: 1Q09 results

Very nice. Both topline and bottom-line growth:
  • Revenue up 7%, abt 4M
  • Staff costs, the largest cost component, only up 4%, or 1M
  • 17% increase in purchased and contracted services (approx 600K), mostly due to insurance claims. Partially offset by a 4.5% decrease in consumables.
  • Profit before tax up 21%. 1Q09 EPS was 1.50c
The 1Q results take care about any concerns I had of RMG's revenue falling due to the recession. And their move into the insurance business with subsidiary International Medical Insurers looks to be paying off.

My only concern:
Medical insurance is a completely different business from providing healthcare:
  • Medical insurance may leave you with a lot of potential liabilities, especially when you offer worldwide coverage. Indeed, the business of medical insurance is to cover such unexpected liabilities. It is hard, mabye even impossible, to get a picture of such potential liabilities from a balance sheet.
  • This is more so when the insurance business results are consolidated with those of healthcare and hospital.
Other notes:
  • CIMB report (11th Mar) says they expect Raffles Hospital to increase bed capacity from 200 to 220 by 2010.
  • (BT article, Friday 17th Apr 09, Chen Huifen) At a media briefing..., Dr Loo said that only 40% of staff costs are fixed. Assume he is referring to the whole group (healthcare plus hospital).

Saturday, April 11, 2009

Stocks that have gone up (Nov 08 to Mar 09)

While waiting for an appropriate time to enter the market:

ARA Asset Management
Biosensors Intl
capitalretail china
chemoil energy limited
dairy farm (did not fall for the entire bear market)
Epure (under 25c)
fortune real estate inv trust
golden agri (mabye)
HIP (probably overbrought now - up 50% in 6 weeks)
Jardine C&C (double bottom Nov/Mar, just brokeout - up 60% in the last 6 weeks)
Keppel mabye (recent breakout - up 30% in 6 weeks)
Kim Eng (stockbroker)
Pan united corp
RMG (vested)
Rotary Engineering
SiHuan Pharma Holdings
Tat Hong (mabye)
Tianjin zhong xin pharma group (did not fall for the entire bear market)
UOB-KH (stockbroker)

No clear sector leadership.
- Some resource stocks: Traders (Noble/Olam) and CPO (wilmar, golder agri) and SPC
- China pharma

Friday, April 3, 2009

AirAsia: 'Consolidated' results previously hard to follow

For some companies, the basis of 'consolidation' in their consolidated results is very important.

Was looking at AirAsia, came across a series of posts from regarding that the way AirAsia consolidates its results. AirAsia consists of:
  • Air Asia Berhad (AAB) - the main entity which the financial results are for. Carries out Malaysia operations, and owns 49% percent of its two associated companies below.
  • Air Asia Thailand (AAT)
  • Air Asia Indonesia (AAI)
  • Other subsiduaries (eg: Culinary services and Hong Kong) not relevant to this topic.
In essence, the consolidated results account for AAI and AAT using the equity method: which generally limits the recognition of losses to the sum invested. So AAT's and AAI's losses are no longer recognised.

This makes it more difficult to track AA's performance. In 2006 and 2007, we would have had to consolidate the results our self to take into account losses of the two entities.

Big lesson here: For 'investment holding companies' or companies that hold many subsidiaries/associates (especially less than 50%), check for unrecognized losses due to the 'Equity Method'.

Fortunately this does not affect AA much in 2008. From their 4Q08 interim results (not the annual report), footnote 17 says that both AAI and AAT are both operational profitable, after excluding the one-off massive losses taken for unwinding fuel and swap contracts.

More abt AA later.