Sunday, July 23, 2017

This is the "Tech Firm" I invested in!

It has been some time since I wrote anything. I have ideas for articles but I do not have the time to write! My life has just been too busy lately, especially when there is an increase in workload and also preparation for my new home. 
Furthermore, "Battling on 4 fronts" has also kept me to be on my toes. At least 1 battle is over and I had 4 lots of Netlink Trust. Another battle will end soon and hopefully the outcome will be favorable.

As of now, I hope you will spent some time reading about this new counter that I added in the last 2 weeks.

I have stated that I was was looking at counters within the technology sector when I wrote that article about FANG and BAT.

So while searching for such technology counters within SGX, I decided to purchase this counter instead, which is still technically a traditional company (with 92% of the revenue coming from its traditional side of the business). But its expansion into the technology side of the business is amazing and I believe this is where the company will grow big!

Profile In Short (taken from their website)

Listed on the SGX Catalist in 2016, Secura Group Limited is a fast growing provider of an integrated suite of security products, services and solutions. As a premium security agency, they offer security guarding, cyber security, homeland security, security systems integration, security consultancy, executive protection and events security, and private investigation.

Their security printing business, through our wholly-owned subsidiary, Secura Singapore Pte Ltd, is the largest cheque printing business in Singapore. Our other security services are undertaken through our wholly-owned subsidiary, Soverus Group Pte Ltd.

As a one-stop security solutions provider, they are able to customise solutions specific to customers’ requirements. With their strong and continuous focus on staff training, and constant innovation of our products and services, they have gained a reputation for delivering quality services which have enabled us to build a well-diversified customer base.

No scorecard was done on this counter prior to purchasing it. This is because this counter only IPOed for about 1+ year and was purchased due to its growth (Should be the 1st time I am doing this) in the technology sector.

So why am I interested in it?

1. Share Price has Fallen to 40% from its IPO Price


The counter's share price has fallen significantly and is 40% below its IPO price of $0.225. The share price has been battered down due to poor results from the last few quarters. This is especially true as the last quarter reported losses.

In addition, with the hype already over for this counter, I believe the current share price is more stablised. Even if the counter is hammered by future losses, I don't think the price will drop significantly as the public float is only around 39%.

Moreover, the moratorium period is already over. If those cornerstone investors intend to sell of their stake, they will have already done that a few months ago.

2. Growth in Cyber-security Business and the Cyber-Security Bill


If you look at the breakdown of the revenue, Cyber Security actually rose 194%! 

In addition, with Singapore government implementing a new cyber-security bill, this will open up much more opportunities for this counter to grow in future. 

Companies in Singapore will not longer be able to act like cyber-security is a secondary factor anymore.

Oh... and to show how serious Singapore is about cyber-security, the government even set up the Cyber-Security Agency in 2015 (I don't even know that).

3. Secura Training Academy appointed by SkillsFuture Singapore

The counter's Secura Training Academy has been appointed by SkillsFuture Singapore as public and in-house Approved Training Organisation (ATO). 

This meant that Singaporeans is able to tap on government funding for SkillsFuture training annually till 2020. 

Therefore, if more Singaporeans use their SkillsFuture funding towards applying training programs in Secura Training Academy, the latter will definitely stand to gain significantly.      

4. Detachable Warrants with Exercise Price at 35 cents

When this counter IPOed, it actually accompanies with 2 detachable warrants expiring in Jan 2019 and at exercise price of 35 cents each. However, if the share price is not close to 35 cents, the management should not have expect investors to exercise these warrants. 

Thus, the management must have believe in the company's ability to grow, so that prior to Jan 2019, the share price should be at least near 35 cents.

But there are also some issues...

1. Peter Lim Factor

I believe I have said before. Rich people can allow a company's share price to fall significantly. They can wait for the company to have a turnaround year and for the share price to rebound.

But retail investors like us, we cannot really wait. Even if we say I am a"long term investor", your emotions may not be able to wait.

2. Growth In Operating Expenses as well

In the first year, the net profit was not as high is due to the cost of IPO expenses. But in the latest quarterly reporting, the losses were due to the high administrative expenses as well as high selling and distribution expenses.

The explanation is as per stated in the report:

- "Distribution and selling expenses attributable to the acquisition of the SSPL Group and RSPL amounted to S$1.07 million and S$0.25 million respectively in FY2016. This mainly relates to the payroll cost and commission incurred by the sales and marketing department and the amortisation of customer relationship arising from the fair valuation of the SSPL Group amounting to S$0.22 million."

- "Administrative expenses increased by 67.8% or S$2.35 million, from S$3.46 million in FY2015 to S$5.81 million in FY2016 due mainly to the cost incurred by the Company in relation to continuing listing and related fees, professional fees for merger and acquisition and increase in staff cost as a result of formalising the corporate functions to support the Group’s expansion plans."

Thus, if the company is unable to reduce expenses, then we should be expecting the share price to fall further.

3. The Main Competitor

As per wikipedia: - "Ademco Security Group is a Singapore-based security services company that sells monitoring services, manpower security services, unified security management, and enterprise security software. The company has approximately 8000 corporate and government clients across Asia, including Singapore, Malaysia, Philippines, Indonesia, Thailand, Vietnam, India, and China’s major cities. It established Singapore’s first private wireless mesh network for security clients in 1998. It currently employs 400 in Singapore and its branch locations in six other countries. It reported 2013 revenues of S$28 million."

I believe this company is Secura Group's biggest competitor. 

In Short

For Secura Group to really perform well, I believe it has to expand significantly within the cyber-security space and it has to reduce its administrative expenses significantly.

So here is the post on the "technology" company I was stating. Hope it did not disappoint you.

Current Price: $0.136 as of 23 July 2017.

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

Do note the author is vested in this counter/company at $0.137.  

As stated in the past few posts, there will be changes to T.U.B Circle and Super Scorecard. Please like our Facebook page (T.U.B Investing) and follow me on InvestingNote for the latest updates!

2 comments:

  1. I have to agree with you on this one. I think cyber security is on the rise. If Secura Group can expand into that business it could create a very large amount of new revenue. From there, they could turn these customers into reoccurring with possible add-ons for there security packages and it will be a great opportunity for them. cyber security is the way to go for Secura group.

    ReplyDelete
    Replies
    1. Hi Michael

      Yes... This will be the main driver for their future revenue.

      Regards,
      TUB

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