2011 IS turning out to be a bumper year for logistics specialist Chasen Holdings, with significant contracts clinched in China, South Korea and the Czech Republic and an oil & gas engineering project.
And the stock has done remarkably well: It is up 47% in the year to date, closing at 51.5 cents yesterday.
Chasen has recently clinched two relocation projects to move consumer electronic production plants to the PRC and Malaysia worth S$4.7 million and two engineering projects in Singapore worth S$4.9 million to design and build a clean room and renovation works on a 5-star hotel.
Revenues generated during the first six months of the financial year ending 31 Mar 2012 amounted to S$53.7 million, which is about three-quarters of FY2010 revenues. 1H2012 net earnings also rose by a whopping 82% year-on-year to S$5.4 million.
Its CEO, Mr Justin Low, and director, Mr Eric Ng, met analysts yesterday for an update after it announced the results.
Listed on Catalist, Chasen specializes in relocation solutions for sophisticated machinery and equipment with complementary logistics, technical and engineering service capabilities.
Chasen is riding on an increase in capital expenditure by large manufacturers. For example, total spending on fab projects could approach US$47.2 billion in 2011, exceeding the peak year’s 2007 fab spending of US$46.4 billion, according to estimates by SEMI Industry Research and Statistics group.
”There may be an uncertain economic outlook now but relocation services are needed whether a factory opens, closes or shifts to a cheaper location,” said Mr Low.
Revenue increased 41% y-o-y to S$25.1 million in 2Q2012 due to broad-based growth in all three businesses segments namely, Specialist Relocation Services, Third Party Logistics Services and Technical & Engineering Services.
Specialist Relocation services remained the core revenue driver, contributing about S$13.3 million or 53% to the Group’s revenue in 2Q2012.
Gross profit margin contracted 3 percentage points to 27% as it had more engineering projects and this business segment contributes high dollar value but has lower margins.
Total operating expenses (including distribution and selling expenses, administrative expenses and other operating expenses was 31.6% higher at S$5.0 million due higher to the enlarged Group resulting from recent acquisitions.
Net earnings were up by 28% at S$2.1 million.
Net gearing ratio rose slightly from 8% to 11% as at 30 Sep due to a drawn-down on credit facilities to finance Chasen’s larger scale projects.
However, Mr Ng highlighted that he expects the execution of relocation projects in 2H2012 to slow down as the construction of plants in China are being delayed. Some of Chasen’s projects were also completed ahead of schedule in 1H2012 instead of in 2H2012.
Below is a summary of questions raised at the meeting and the management’s replies.
Q: Why are you now able to operate without a base in the Czech republic?
The scale of the project is too small for us to have a base. We have an agent there and we send our personnel there manage the relocation. The decision-maker from the client is based in Singapore, and they appointed us.
Q: Where are the enquiries coming from for warehousing?
Everywhere. We have warehousing for products as well as equipment. Equipment warehousing is more stable. Currently, we are seeing a surge of warehousing demand for products.
Q: What is your dividend policy?
At IPO, we set it at 30% of net profit. In the past 3 years, we have been paying at 0.6-ct per share. We are looking at setting our dividend payout to give shareholders a healthy dividend yield.
Q: What accounts for your high S$45.5 million in trade receivables, accruals and retention sum?
Trade receivables accounts for S$29.9 million. We have accrued revenue of S$8.3 million from all our business segments. S$1.1 million is retention sum. There is a sum of about S$6.2 million under arbitration from a project for Kingsmen Creative in 2010.
We have already made some provision for this last year. The first hearing was on 17 Oct. We should have the answer from the arbitrator by Dec.
Q: You have a lot of short-term borrowings. Do you have any plans to transfer this to long-term borrowings?
These are project financing facilities or trade financing. Banks prefer to give loans only when they see a cash-generative project behind the loan. We are trying to persuade the banks to give us more long-term loans.
Q: What is the financing cost in China?
Our prime rate in Singapore is only 5% p.a. In China, it is 7% to 8%, depending on the bank.
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