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Stocks In Focus (Olam, UE, Banyan Tree) – 16/05/13
Olam Reports 10% Rise In 3Q13 Earnings
Olam International (Olam), reported a 10 percent increase in its 3Q13 earnings. Earnings per share (EPS) for the quarter were $0.0434, a reflection of an upside of some 9.3 percent compared to 3Q12’s of $0.0397. Higher revenue of some 11.5 percent increase for 3Q13 and 19.7 percent for 9M13 was also seen. This was mainly due to the substantial increase in revenue contribution from its Food Stapled & Packaged Foods segment. 9M13’s net profit of $305.8 million in whole showed a 17 percent increase compared to that of 9M12’s net profit. Shekhar, executive director of finance and business development expressed that the results, which saw an eventful quarter, demonstrated the resilience of Olam. Shekhar further added that although the performance is not a runaway one, the ability of Olam to focus on business as usual stresses the resilience of its business model and the value-add that it provides to its customers.
Significance: Olam’s current net debt to equity at 2.2 times, albeit being lower than its current ceiling at 2.5 times, is still above its FY16 target of 2 times. In a strategy highlight it unveiled in April, Olam highlighted its plans to generate free cashflow more quickly to reduce its gearing and capital expenditure and make its business less complex.
24% Fall In 1Q13’s Net Profit; UE
United Engineers (UE) have reported a 24 percent slip in its net profit for 1Q13, mainly attributable to a significant increase in administrative expenses. Net profit for 1Q13 was $7.4 million, compared to that of $9.7 million in 1Q12. Revenue for the same period under review however reflected an increase of some 17 percent to $136.6 million, mainly due to increased rental contributions from its income producing properties and higher revenue contribution from its listed subsidiary UE E&C. The significant increase in admin expenses (up 77 percent) was mainly attributable to higher staff and operating costs as UE BizHub EAST and Park Avenue Changi went into operation, coupled with higher writeback of staff bonus provision in 1Q12. UE also noted that its mandatory cash offer for WBL Corporation (WBL) has become unconditional on 13 May 2013.
Significance: Coupling the new operations rolled out from UE BizHub EAST and Park Avenue Changi with the inclusion of WBL’s financial performance moving forward, the consolidated performance of UE is likely to see some changes going forward.
Banyan Tree’s 1Q13 Earnings Up 19% to $14.2m
Banyan Tree Holdings (Banyan Tree) reported a 19 percent increase in profits to $14.2 million for 1Q13, compared to that of $12 million in 1Q12. The increase in profits was due to the sale of the Angsana Velavaru hotel in the Maldives, and higher revenue from its hotel investments unit and fee-based business. Revenue went up by 17 percent to $96.9 million, mainly attributed by strong contribution from hotels in Thailand while depreciation and financing cost was lowered through the sale of Angsana Velavaru. However, lower revenue from its Property Sales segment had partially offset revenue by $2.6 million. Commenting on the results, Ho Kwon Ping, executive chairman of Banyan Tree said “The continuing favourable performance from our Thai operations given the absence of events-related risk and the resilient tourism industry helped sustain the favourable results in 1Q13. Our decision to sell and leaseback Angsana Velavaru as part of the asset rebalancing strategy to unlock values also boosted the performance this quarter.”
Significance: Ho expressed that performance of Banyan Tree for the next two quarters is expected to fall below 1Q13, as the next two quarters are low seasons coupled with the persistent economic weakness in Europe, their key market. Seven resorts in China and one in India are expected to open this year which should help defray lower earnings from Europe by tapping on these emerging markets.
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