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Monday, September 1, 2014

Straits Trading

Recently, a friend told me he bought Straits Trading in August 13 at the price of $4.4. However, the price now have dropped to $3.

In this blog post, i will explain why it dropped dramatically due to the earning results. In HY2013, the company made a profit of $80.4m, which most of it is due to a gain on disposal of WBL shares. However, HY2014 did not see much income coming in besides their tin mining, smelting and hotel business.

While they earned $343m including a gain from the disposal of investment properties, its expenses offset most of its the earnings. Its tin mining and smelting business incurred $301.4m and their other, financial expenses and exchange losses amount to $26.5m.

After deducting all expenses, they reported $4.9m in net profits, which was 1636% less than last year. The stock price see itself moving up since Jun 13 and started dropping in September 13. The half year reports were released in Aug for both years.

The most important thing to highlight here is the fact that the major gain on disposal in 2013 does not determine the company's ability to grow given its huge expenses on their tin mining and smelting business. Although, its current price have factored in the negatives, i don't expect the company to grow much given its high operating expenses.



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