Bonvest Holdings LTD Analysis

Today I'll be analyzing Bonvest Holding LTD.

The Group's four core businesses are:

• property development and investment
• food and beverage ownership and management
• hotel ownership and management
• waste management and contract cleaning of buildings

To date, it is the authorized franchisee of Burger King and Orange Julius (Dairy Queen). The Group operated approximately 100 F&B outlets island-wide as of 31 December 2003 under the franchises from Burger King, Starbucks Coffee, Orange Julius and Dairy Queen, as well as under its own brand, Captain Cook.

Its hotel includes Sheraton Towers and The Residence (Tunis and Mauritius).

Its property management includes Liat Towers, Yishun Ten and other local and overseas residential.

The Group also own 77.36 of Sesdaq-listed subsidiary, Colex Holdings LTD, which is one of the leading waste management and contract cleaning companies.

With such a broad operations, comes many pros and cons. The benefits of a diversified base is that it wouldn't be drastically affected when one sector of its operation is not doing well. Also, a broader base could also mean higher earnings, but that is highly subjective. This is because the operations are wide and management may not be as sensitive to changes, adapting may be a step slower and thus reducing revenues. The possibility that such a broad operation might be too unfocused for the management to handle. Having said that, let us take a look at how the management has performed in the past few years.

	FY1 1996	FY1 1997	FY1 1998	FY1 1999	FY1 2000
Net Inc/Net Profit (Loss)	22.572	3.524	-77.802	34.092	16.934
Fully diluted EPS			-0.273	0.107	0.055
Book value/share	1.580	1.566	0.975	1.111	1.222
P/E Ratio	11.402	35.294		5.874	8.095
Dividends/share	0.024	0.012	0.000	0.006	0.010
Current ratio	1.582	2.714	1.475	2.354	2.140
Profit margin	14.315	2.082	-52.750	10.616	8.662

	FY1 2002	FY1 2003	FY1 2004	FY1 2005	FY1 2006
Net Inc/Net Profit (Loss)	6.416	10.639	21.090	22.334	33.010
Fully diluted EPS	0.021	0.032	0.056	0.059	0.087
Book value/share	1.103	0.978	1.008	1.234	1.361
P/E Ratio	16.667	13.472	8.399	11.343	13.299
Dividends/share	0.014	0.018			0.033
Current ratio	1.990	1.893	2.307	2.436	2.075
Profit margin	3.143	4.638	9.517	9.541	11.344

As you can see, the net profit is generally on an uptrend, resulting in increasing EPS. There has been a drop in profit in the years after 1997, and I believe this was caused by the Asian Financial Crisis. Subsequently the company's net income rose. Profit Margin improved too. The company has also been generous with its dividend, in part due to the new tax law.

Taking a look at its current ratio, you find out that the company took special care when leveraging and raising capital for its operations.

Take note though, that its average P/E ratio for the past 5 years is around 12 times its earning. At this point of time, the stock's closing price was SGD$1.40, P/E ratio = 8.6. The stock is trading in its lower range.

It is also noted that recently some of the directors has been purchasing the stock from the open market.

Looking ahead, similar to all businesses, there is a certain amount of risk and we are to assess the risk to understand and expect what could happen.

1. For property and rental, over supply of office and retail space, lack of demand due to weak economy could all be possible reasons for under performance of the company.
   
2. For the F&B sector, new entrants and newly renovated food courts and hawker centres are a threat to its market share, as these outlets compete over customers like you and me. Poorly selected outlet could also affect F&B revenue.
   
3. For hotel, since most of it is based overseas, political and terrorism are constant threats to the business. And unlike F&B, where we can determine how well the business is by the length of the queue, we are also not able to judge how well the hotel fare. On the other hand, we benefit when the country's tourism industry boom.
4. For the industrial operations, it seems the most dangerous to me. For one, I do not understand the business and also I do not understand why they had bought such a business who's core operation is so far off from property and hotel. (Note: F&B can be considered real estate, since a good location is a pre-requisite for a good outlet.) Secondly, this industry is well-known for companies under-cutting one another. Thus for this section, I am unable to determine it's risk.

Moving ahead, we will take a look at how the business can grow. In my opinion, the F&B and hotel segment are in the mature stages, we will not be able to see exciting growth in revenues. No comments with regards to the industrial cleaning segment, although I believe that it is a highly saturated industry. So far the exciting growth in its revenue comes, in no small part, from its property segment. Singapore property has been bullish for the past 2-3 years and this has resulted in the meteoric increase in revenue for property related stocks, and Bonvest is one of them. For the current half fiscal year, riding on the property waves, the company has earned 70% of what it has earned in the 2006 full Fiscal Year (7 cents for half year ended 07 compared to 8.7 cents for Fiscal year 06).

Hence, projecting ahead base on past performance, the company seems poised to grow even more. Base on that, the stock is undervalued at SGD$1.40. But nobody ever drove ahead looking only at the rear mirror, something I have to remind myself all the time. The thing about property development is that the revenue are one-off, non-recurring items. Once sold, we are not able to milk any benefits from it anymore. Furthermore, the part of the money earned from the sale of investment has been channeled to issuance of dividend. This could only means re-invested earnings are lesser than before. I believe the prospect of increased earnings for the property segment might be short-lived.


What I like about this stock:

1. Core F&B business predictable.
   
2. Rental revenue are usually, under current market conditions, not very volatile.

What I don't like about this stock:

1. Industrial Cleaning Business is not easy to understand and thus un-determinable.
2. Property Segment may not last.
3. Earnings not fully invested.
   

Bottomline: The Net Book Value per share now is SGD$1.24. Earnings for half year is 7 cents. Asset plays for this stock might prove valuable . On top of that, although I may not be confident of the stocks prospect, the directors who bought them from the open market has confident in the stocks. Hence, base on the directors confidence and those reasons stated above, I intend to purchase this stock. The holdings has yet been determined but looking at the companies' performance and its portfolio, I believe I will be putting substantial amount of my savings into this stock.

(Chart extracted from Bloomberg on 17/10/07, around 1300hrs)

Bonvest Financial Statement and Dividend Annoucement (SGX)

Disclaimer: Completeness, accuracy and opinions based on information and comments mentioned via this website cannot be guaranteed. Investors should always conduct their own research before making investment decisions.

The Lemonaire

Vicom LTD Analysis.

Hi today I would like to analysis the Company: Vicom Ltd.

VICOM Ltd is currently Singapore's largest technical testing and vehicle inspection company, offering a comprehensive range of test and vehicle inspection. VICOM offers services such as road tax renewal, transfer of vehicle ownership, sale of motor insurance/general insurance, in-vehicle unit services, speed limiter test, enforcement check on overloaded vehicles, chassis dynamometer smoke test, pre-registration check for parallel importer, tinted glass check and car evaluation.Today, it provides inspection services for private cars, taxis, motorcycles, light goods vehicles, heavy goods vehicles and buses. The Company has also exported its expertise to various countries around the region.

Its subsidiary also serves other profitable purposes, such as providing testing, calibration, inspection, consultancy and training services to a wide spectrum of industries. The subsidiary are mainly, VICOM Inspection Centre Pte Ltd, VICOM Assessment Centre Pte Ltd (VAC), SETSCO Services Pte Ltd, JIC Inspection Services Pte Ltd.

More information can be found on its corporate website:http://www.vicom.com.sg

I will analysis first analyze the company base on pass performance, since I am approaching stock picking with a defensive mindset. Thereafter I will attempt to explain what cause such performance for the company, and finally why I think the company will grow.

	FY1 1997	FY1 1998	FY1 1999	FY1 2000	FY1 2001	FY1 2002	FY1 2003	FY1 2004	FY1 2005	FY1 2006
Book value per share	0.405	0.419	0.447	0.477	0.475	0.529	0.595	0.638	0.696	0.734
Earnings per share	0.026	0.036	0.056	0.052	0.057	0.057	0.100	0.093	0.104	0.123
P/E Ratio	26.731	11.389	8.571	12.115	8.596	10.965	8.509	10.356	8.934	9.919
Dividends/share	0.028	0.022	0.022	0.028	0.029	0.029	0.050	0.046	0.052	0.117
Net Inc/Net Profit (Loss)	2.048	2.891	4.441	4.195	4.600	4.641	8.157	7.676	8.658	10.295
Current ratio	2.777	2.395	2.932	3.252	0.864	1.887	1.084	1.022	1.379	1.512
Shares out	80.000	80.000	80.000	80.752	80.752	81.218	81.943	82.877	83.219	83.881

• As you can see, the company's Net profit has been generally increasing every year, except for the year 2000 and 2004. This in turn is reflected in its increasing Earnings per share (EPS).
• Notice that Book value per share has been on a general increase.
• The current ratio has been healthy over the pass 10 years. It has been careful about financing itself, never borrowing more than its asset, as reflected by the current ratio. (Benjamin Graham mentioned that for defensive investors, the company's current ratio should not be below 1.5.)
• The company was never stingy with its earnings; the investors are rewarded with dividend each year.In 2006, the company doubled its dividend. Its okay if a company decreases its dividend payout, but something is not right when it completely stops paying out and more attention have to be paid to its financial when that happens..
  
• Finally, its shares out hasn't changed much throughout this past few years. This is a good sign, since more shares out means more dilution for the existing shareholders. It would be even better if the company is buying back its own shares though.

As you can see, the management has done a great job growing the business in the past few years. A quick check to on today's price shows that Vicom is selling at SGD$1.74, which yields a P/E ratio of 14 compared to its EPS on Feb 07 (SGD$0.123). For the 2 quarters in 2007, the Group's EPS is standing at SGD$0.0954 and Book Value per share is SGD$0.7432. The latest dividend issued on 12 Sept was 15.5 cents per share!

That is so much for the past performance. As Mr Buffett coined it before, we do not drive looking only at the rear mirror, we have to look at the possible future of Vicom. To extract this information, we have to do our research. Digging into annual report is one way of doing. Going out to find out is also another way of doing research.

Digging into the annual report, I noticed that Vicom has already gained 73.1% of the market share for vehicle inspection, through Vicom Inspection centre. This segment brought about $17million, making it 30% of its income. $32 million comes from Setsco, where test and inspection centre of various plants and companies. This makes about 58% of its profit. Since we have identified where the main income comes from, we should analyze them with more intent then the other revenue generating segment.

In my opinion, it would be hard to increase market share for vehicle inspection, and highly impossible to gain 100% market share. Therefore, the possibility of this segment's income would probably be the same or slightly lower. Unless Vicom increases charges, we wouldn't be banking on this segment to substantially increase the earnings. Rather, the trump card would be SETSCO. If they are able to increase revenue coming from there, it would do more help on the income statement, but that is something I can't determine as of now.

This lack of information on the probable increase in revenue is hard to determine just by sitting in front of the comp. And thus field research would be needed.

What I like about this Company:

• Its management is experienced and respectable, most of them are holding onto appointments in large listed corporations.
• It has seemingly monopolized vehicle inspection. Anything that got to do with vehicles, Vicom should have a piece of it. Having said this, I'm have a certain level of confidence that the market share wouldn't decrease drastically due to competitor. Other minor possibility that might jeopardize this segment's income would be drivers not needing to inspect their vehicles.

What I don't like about this Company.

• The dividend that they issued, stated as 97% of the Grp's profit after tax. This is disturbing since not much is reinvested into the business, which means that there might be possibility that they may not have explored enough data to determined how much they should reinvest.
• Also, under my current state/location, I am unable to find out on the sales of SETSCO.
  

Would I buy it? Currently the company is earning 9.54 cents. There has been estimates that it might hit 17 cents by this year. This might account for the price of $1.7 since they expect P/E ratio to be near to its historical P/E (11). Personally, I feel that the company might be able to improve on the 17 cents estimates. Hence I feel that it is a potential buy. At this point of time, the stock is not undervalued, nor is it overvalued. For investors who hold it for long term, this company is solid. But for defensive investors like me, having an additional safety measures is a must. I always look for 20-50% undervalued stock. Thus at an estimate of 17 cents, with historical P/E ratio of 11, the safest way to buy is at SGD$1.5.

Basically, this is what I feel, my decision is purely my own and in no way should affect your opinion.

Fiscal Year 2005 Financial Statement
Fiscal Year 2006 Financial Statement
2007 1st Quarter Financial Statement
2007 2nd Quarter Financial Statement

2006 3rd Quarter Financial Statement

Additional Information: VCOM.SI

Today's Price close at: $1.73

The next financial release will be in early Nov, pls be on a lookout.

Disclaimer: Completeness, accuracy and opinions based on information and comments mentioned via this website cannot be guaranteed. Investors should always conduct their own research before making investment decisions.

Market loves to bait and trick.

This is the current market, the quotes in the snapshot are realtime! Notice how sometimes the market plays trick on you. I just sold PAG last fri and now it surge 6%!

Interestingly, the stock that I sold last fri are those that shot up unbelievably! Well my only take away are the following. Fear hit me when PAG and STI ETF dropped below the price I bought. The price stayed significantly below my buy price by a certain percentage. This cause some internal struggling and questioning of my buy decision. Hence when the price rose up slightly, I grabbed the chance to sell it, thinking that I can reduce my losses by selling it above its 6 weeks trading range, realizing my loss as a result.

So the lesson learnt is that when you buy solid company, hold it unless there is a fundamental change in the company. And I attribute my wrong decision of selling to fear of the market's volatility.