Tuesday, September 27, 2016

TTJ Holdings Ltd - Full Year Results Announced

On 26 Sep 2016, TTJ Holdings Ltd announced the latest full year financial results for 2016. Share price has since fallen 15% the next day.

So here is a summary of the financials:
 - Significant increase in revenue and also increase net profit
 - Slight reduction in investment property and fixed asset
 - Was able to maintain cash amount from 2015 to 2016, despite giving an 8 cents dividend in 2016.
 - Slight increase in liabilities but without any bank borrowing!
 - With such rosy financials, the only negative seem to be that dividend was reduced to 1.7 cents.

So how does it fare against the Enhanced Triple S Scorecard with Dividend Scorecard Portion? (Based on the share price $0.395):

The Enhanced Triple S Scorecard continued to pass with flying colours. But the Dividend Scorecard failed.

1 passed. 1 failed. Why?

Dividend Scorecard Portion failed because Price to Book ratio is higher than 0.8. This is expected as this stock was never a net current asset value stock. Share price is higher than Net Current Asset Value because it has already been "discovered". 

However, it was still deem a value stock due to its ability to generate free cash flow and good dividend payout. Current earnings is also high enough to maintain a low Price to Earnings. Therefore, TTJ Holdings Ltd continued to be a good value stock as deemed by Enhanced Triple S Scorecard

So any other issues?

1. Change in Dormitory Size - As stated in previous post, TTJ Holdings Ltd is unable to renew the tenancy for the 5000 beds dormitory. Instead, the company replace it with a 500 beds dormitory. As per past financials, this dormitory business provides about $10 million of net profit. In future, net profit could be impacted very badly.

2. Order Book - As per latest financials, TTJ Holdings Ltd stated it is left with about $48 Million worth of order book that is to be completed in 2017 and 2018! This will be a drastic decline from $136 Million (Revenue in 2016)!

3. 85% shareholding in the hands of "Boss Teo" (Managing Director) - It is known that the Managing Director cum Chairman hold almost 85% of the shareholdings. This means that TTJ Holdings Ltd is "ripe" for privatization.

4. New Business - As per comments, "Going forward, the Group expects the operating environment to be increasingly challenging due to economic uncertainties and generally weaker sentiments in Singapore.  While the Group continues to experience enquiries for a mix of public and private sector projects, the industry has become increasingly competitive. In view of this, the Group will continue to actively pursue projects and also explore new areas of business." This meant that TTJ Holdings Ltd may venture towards other business. As per management's past actions, it only look for high net profit margin. So hopefully this new business venture will be similar and produce high net profit.

In Short  

Firstly, 1.7 cents of dividend against the current share price of $0.395 is still a dividend yield of 4.3%. Therefore, this drop in dividend will not be drastic for me. 

Furthermore, as the stock continues to pass the Enhanced Triple S Scorecard, this will provide some comfort for me if I decided to hold on to the stock.

In any case, my view is that if these negative view continue to drive the share price down to $0.320 to $0.340, I may enter to buy more.

If it rise back to $0.410 to $0.450, I will offload half of my holdings.

If the share price got stuck in between, I will just hold on to my holdings unless I find other opportunities. After all, despite the negativity, this stock still have its positive points.

Current Price: $0.395 as of 27 Sep 2016.

Please do your own due diligence before you invest in this stock.

Do note the author is vested in this stock/company at $0.325.  

For those who are interested to find similar quality value stock that can produce at least 5% dividend yield, you can come to the next Sharing Session with T.U.B! If you are interested to attend, do not hesitate to contact me directly.

Oh... and do remember, please like our Facebook page - T.U.B Investing.

4 comments:

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  3. I read your post at valuebuddies, Do you include the cash or NAV in your calculation of fair value of 30.5c for TTJ ? Please share. Sorry i delete the top 2 posts which does not present what i really want to ask, Thanks

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    1. Hi Unknown,

      I used a very unique way to analysis the stock. It is my very own Enhanced Triple S Scorecard with Dividend Scorecard portion.

      Do read about it in the heading tab.

      I did not have any fair value of 30.5 cents stated. I just stated that I will buy if the price fall till 0.32 to 0.34, if not sell if it rises till 0.41 to 0.45.

      My calculation for net current asset value and NAV includes Cash.

      Hope this explains.

      Contact me via FB messenger or email me for more information.

      Regards,
      TUB

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