1 Risk That Dividend Investors Should Know Before Investing In SATS Ltd Now
- Original Post from The Motley Fool Sg

SATS Ltd (SGX: S58) is a company with two business segments: Food Solutions and Gateway Services. The Food Solutions segment covers airline catering, food distribution, and industrial catering whereas the Gateway Solutions segment is involved in ground handling services of passengers, flights, and cargo.


In a previous article, I highlighted a number of reasons why SATS might be a good share for dividend investors to own for the long term. As a quick recap, those reasons were:



  1. SATS has a solid financial track record

  2. It has a growing dividend

  3. The balance sheet is strong


But, all companies come with risk and there is one risk with SATS that investors should take into account as well before deciding whether they should be investing in the company right now.


The risk: A high valuation


As investors, we should always invest in a share at a price that’s less than its value. This applies not only to value investors, but also to dividend investors.In simple terms, that means we should be paying less than a dollar for each dollar of assets.


One way to gauge SATS’s valuation is to compare its price-to-earnings (PE) and price-to-book (PB) ratios with those of the market. I will be using the SPDR STI ETF (SGX: ES3) as a proxy for the market; the SPDR STI ETF is an exchange-traded fund that tracks the fundamentals of Singapore’s stock market barometer, theStraits Times Index (SGX: ^STI).


SATS’s share price is at S$4.77 currently, which gives the company PE and PB ratios of 20.5 and 3.3, respectively. These are significantly higher than the SPDR STI ETF’s selfsame ratios of 11.5 and 1.1.


On one hand, it is clear that SATS exhibits some positive traits (its good track record of growth, history of growing its dividend, and strong balance sheet). On the other hand, investors need to consider whether these traits will be sustainable in the long run; it’s a crucial consideration given the company’s high valuation right now.


Conclusion


There are many things to like about SATS as a dividend stock for the long-term. But, investors need to consider whether its current high valuation (as compared to the market average) is justifiable.


$STI(^STI.IN) $STI ETF(ES3.SI) $SATS(S58.SI)

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1 Simple Number for Understanding 3 Important Areas of SATS Ltd in 2019
- Original Post from The Motley Fool Sg

SATS Ltd (SGX: S58) is a company providing food solutions and gateway services solutions. The Food Solutions segment covers airline catering, food distribution, and industrial catering, whereas the Gateway Solutions segment is involved in the ground handling services of passengers, flights, and cargo.


Let’s dig deep into SATS’s return on equity, or ROE.


The choice of ROE


We’re using one metric — the return on equity, or ROE — to understand SATS’s business. This financial metric gives investors important insight into a company’s ability to generate a profit using the shareholders’ capital it has.


A ROE of 20% means a company generates $0.20 in profit for every dollar of shareholders’ capital invested. In general, the higher a company’s ROE, the more profitable it is. A high ROE can also be a sign that a company has a high-quality business.


It’s worth noting that the use of high leverage — which increases the financial risk faced by a company — can also increase a company’s ROE.


Calculating the ROE


ROE can be calculated using the following formula, which is the way many investors do it:


ROE = Net Profit / Shareholder’s Equity


ROE can also be calculated using a different approach, as shown below:


ROE = Asset Turnover x Net Profit Margin x Leverage Ratio


Calculating a company’s ROE will reveal three important things: how well a company is managing its assets, how efficient it is at turning revenue into profit, and how much financial risk it could be taking on.You canlearn moreabout this formula for ROE.


With that, let’s turn our attention to the ROE of SATS.


The actual numbers


Asset turnover measures the efficiency of a company in using its assets to generate revenue. It is calculated by dividing a company’s total revenue by its assets.


SATS had total revenue of S$1,828 million and total assets of S$2,408 million in its fiscal year ended 31 March 2019 (FY2019). This gives it an asset turnover of 0.76.


Net profit margin measures the percentage of revenue that is left as a profit after deducting all expenses. In FY2019, SATS had a net profit margin of 14.0%, given its net profit of S$256 million and revenue of S$1,828 million.


Lastly, we have the leverage ratio, which shows the relationship of a company’s total assets to its equity. It is calculated by dividing total assets by equity. A higher ratio means a company is funding its assets with more liabilities, hence resulting in higher risk. In FY2019, SATS had total assets and total equity of S$2,408 million and S$1,817 million, respectively. This gives it a leverage ratio of 1.33.


When we put all of the numbers together, we arrive at a ROE of 14%.


Foolish takeaway


Return on equity is a good metric to use to understand the quality of a business, but investors should be aware of (and understand) all three components that make up the ROE. I usually pay more attention to asset turnover and profit margin since those two metrics better reflect a company’s underlying business performance.


Last but not least, calculating the ROE is just the start of our research of a company. We should also compare SATS’s ROE with those of its peers, as well as its historical ROE, in order to get a better understanding of SATS’s performance.


Click here nowfor yourFREEsubscription toTake StockSingapore, The Motley Fool’s free investing newsletter. Written byDavid Kuo,Take Stock Singaporetells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead.


TheMotley Fool’s purpose is to help the world invest, better.Like us on Facebook to keep up-to-date with our latest news and articles.


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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned. The Motley Fool Singapore recommends SATS Ltd.


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Is Thai Bev A Bargain Now?
- Original Post from The Motley Fool Sg

Thai Beverage Public Company Limited (SGX: Y92), or Thai Bev for short, is Thailand’s largest and one of Southeast Asia’s biggest beverage companies, with distilleries in Thailand, Scotland, China, and Myanmar.


It is listed on the Singapore market and sports a market capitalisation of S$18.2 billion. It has four core segments – spirits, beer, non-alcoholic beverage, and food.


Between 1 Jan to 31 Dec 2018, Thai Bev’s total return, which includes reinvested dividends, has underperformed the Straits Timnes Index (SGX: ^STI). The former dropped a staggering 31.7% compared to the latter’s drop of 6.5%.


Has the lacklustre performance by Thai Bev’ made it a bargain at current prices?


To find out we will be using four metrics, namely, its price-to-earnings (P/E) ratio, its price-to-book (P/B) ratio, its dividend yield and its net-debt-to-equity ratio.


The F&B conglomerate’s fiscal year ended on September 2018, for FY18. It recorded earnings per share (EPS) of THB$ 0.74 which converts to S$0.03 (S$1 = THB$23.4). With Thai Bev’s current share price at S$0.72, this implies a P/E ratio of 24 at current prices.


Over the past four years (2015-2018), the F&B conglomerate’s EPS hasbeen beteweenTHB$ 1.37 to THB$0.74. So, Thai Bev’s latest EPS was the lowest in the past four years.


At the end of the of FY2018, Thai Bev reported a Net Asset Value of THB$4.82 (S$0.21). This results in a P/B ratio of 3.4 at current prices. Being a services company, it is not unusual to see a high P/B ratio for Thai Bev.


A better comparison couldits P/B ratioagainst the industry average or the company’s historical P/B for a better idea of its current valuation.


At end September 2018, Thai Bev had a net debt position of THB$208.6 billion, while total equity stood at THB$121.2 billion. This indicates that it has a net debt to equity position of 172%. Thai Bev is highly leveraged and any hiccups in its operations could be uncomfortable.


Lastly, Thai Bev’s dividend has decreased over the last four years, moving from THB$0.61 in 2015 to THB$0.39 in 2018. This means that at current prices, Thai Bev is offering investors a dividend yield of 2.4%.


Thai Bev might not be a bargain, despite its underwhelming performancelast year. The four metrics don’t paint a glowing picture for the company. But it could be wortha closer look.


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The Weekly Nibble: Best Dividend Shares
- Original Post from The Motley Fool Sg

Here are some of the most popular articles that have appeared on The Motley Fool Singapore’s website for the week.


Singapore’s Top 5 Dividend Shares Among the World’s Best


Do you like income stocks?


In this article, I looked at the top five Singapore-listed companies that are part of the FTSE All-World High Dividend Yield Index sporting the highest dividend yields. The FTSE All-World High Dividend Yield Index contains 1,389 globally-listed shares that have a higher-than-average dividend yield. The index does not include real estate investment trusts (REITs) and stocks that are forecast to pay no dividend over the next 12 months.


Companies discussed in the article include Hutchison Port Holdings Trust (SGX: NS8U), StarHub Ltd (SGX: CC3), Singapore Telecommunications Limited (SGX: Z74), M1 Ltd (SGX: B2F) and Venture Corporation Ltd (SGX: V03).


2 Singapore REITs I Am Watching This Week


My Foolish colleague, Jeremy Chia, touched on why he kept a lookout for two REITs – Keppel DC REIT (SGX: AJBU) and CapitaLand Mall Trust (SGX: C38U) – when they released their earnings during the week.


Keppel DC REIT released its earnings on 22 January while CapitaLand Mall Trust announced its financial results on 23 January.


3 Singapore Blue Chips That Have More Than Doubled Their Profits In The Last Decade


In this piece, Lawrence Nga explored a total of three Straits Times Index (SGX: ^STI) stocks that have more than doubled their profits in the last 10 years. Do jump into the article to know what the companies are.


Maximise dividends on your REITs with our brand-new Complete Guide To Buying The Best Singapore REITs. We reveal everything we think you need to know about finding the best REITs that hands you a fat dividend cheque ...even if you have no REITs experience at all! Get instant access to your 100% FREE, actionable, 42-page PDF guide here.


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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended units of CapitaLand Mall Trust. Motley Fool Singapore contributor Sudhan P owns units in CapitaLand Mall Trust.


$STI(^STI.IN) $Keppel DC Reit(AJBU.SI) $M1(B2F.SI) $CapitaMall Trust(C38U.SI) $StarHub(CC3.SI) $HPH Trust USD(NS8U.SI) $Venture(V03.SI) $SingTel(Z74.SI)

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1 Risk That Dividend Investors Should Know Before Investing In SATS Ltd Now
- Original Post from The Motley Fool Sg

SATS Ltd (SGX: S58) is a company with two business segments: Food Solutions and Gateway Services. The Food Solutions segment covers airline catering, food distribution, and industrial catering whereas the Gateway Solutions segment is involved in ground handling services of passengers, flights, and cargo.


In a previous article, I highlighted a number of reasons why SATS might be a good share for dividend investors to own for the long term. As a quick recap, those reasons were:



  1. SATS has a solid financial track record

  2. It has a growing dividend

  3. The balance sheet is strong


But, all companies come with risk and there is one risk with SATS that investors should take into account as well before deciding whether they should be investing in the company right now.


The risk: A high valuation


As investors, we should always invest in a share at a price that’s less than its value. This applies not only to value investors, but also to dividend investors.In simple terms, that means we should be paying less than a dollar for each dollar of assets.


One way to gauge SATS’s valuation is to compare its price-to-earnings (PE) and price-to-book (PB) ratios with those of the market. I will be using the SPDR STI ETF (SGX: ES3) as a proxy for the market; the SPDR STI ETF is an exchange-traded fund that tracks the fundamentals of Singapore’s stock market barometer, theStraits Times Index (SGX: ^STI).


SATS’s share price is at S$4.77 currently, which gives the company PE and PB ratios of 20.5 and 3.3, respectively. These are significantly higher than the SPDR STI ETF’s selfsame ratios of 11.5 and 1.1.


On one hand, it is clear that SATS exhibits some positive traits (its good track record of growth, history of growing its dividend, and strong balance sheet). On the other hand, investors need to consider whether these traits will be sustainable in the long run; it’s a crucial consideration given the company’s high valuation right now.


Conclusion


There are many things to like about SATS as a dividend stock for the long-term. But, investors need to consider whether its current high valuation (as compared to the market average) is justifiable.


Click here nowfor yourFREEsubscription toTake StockSingapore, The Motley Fool’s free investing newsletter. Written byDavid Kuo,Take Stock Singaporetells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead.


TheMotley Fool’s purpose is to help the world invest, better.Like us on Facebook to keep up-to-date with our latest news and articles.


More reading



The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn't own shares in any companies mentioned. The Motley Fool Singapore has a recommendation for SATS Ltd.


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5 Things Investors Should Know About Thai Beverage Public Company Limited Before Buying Its Shares
- Original Post from The Motley Fool Sg

Over the last 12 months, Thai Beverage Public Company Limited‘s (SGX: Y92) share price has fallen by 21% to S$0.735 currently. The decline may cause some investors to be interested in buying shares of the company. If you happen to be in this group, I shared in a previous article three things you should know about Thai Beverage before you buy its shares. In this article, I want to discuss two more aspects about the company’s business.


Before I dive into it, here’s a quick description of Thai Beverage’s business for context later: The company operates predominantly in Thailand, and has four different business segments, namely, Spirits, Beer, Food, and Non-Alcoholic Beverages; it’s worth noting too that Thai Beverage changed its financial year end from 31 December to 30 September in 2016.


3 things to know


The three things I shared about Thai Beverage in my previous article mentioned earlier were its financial track record, its recent challenges, and its return on invested capital. I found that Thai Beverage has a patchy track record (its revenue had grown in recent years, but its profit had fallen); all its business segments, with the exception of Food, experienced weakness in the latest financial year; and it managed to generate a solid return on invested capital of 26.5% in its financial year ended 30 September 2018 (FY2018).


4th thing to know: Dividend track record


When studying a company, it is important to see if it has a history of paying a consistent or growing dividend over a long period of time.


In the case of Thai Beverage, it grew its dividend by 11.1% per year from THB 0.44 per share in 2013 to THB 0.67 per share in FY2017. But in FY2018, the company reduced its dividend to THB 0.39 per share because of a decline in profit. Clearly, the recent reduction in Thai Beverage’s dividend is undesirable. Going forward, Thai Beverage’s dividend will likely correlate to its profit (it has a policy to pay at least 50% its net profit as a dividend).


5th thing to know: Valuation


The final thing that investors should consider before investing in Thai Beverage is its valuation.


At Thai Beverage’s share price of S$0.735 currently, the company has a price-to-book (PB) ratio, price-to-earnings (PE) ratio and dividend yield of 3.6, 23.6, and 2.3%, respectively. In comparison, the selfsame valuation numbers for the Singapore market are 1.1, 11.5, and 3.49%. I’m using theSPDR STI ETF (SGX: ES3) as a proxy for the market; the SPDR STI ETF is an exchange-traded fund that tracks the fundamentals of Singapore’s stock market benchmark, the Straits Times Index (SGX: ^STI).


It’s clear that Thai Beverage is valued at a premium to the market because of its higher PB and PE ratios, and inferior dividend yield.


A Foolish conclusion


It’s never easy when it comes to making an investment decision since we must look into many different areas of a company.In the case of Thai Beverage, it has a patchy track record of growth in its financials and dividend, and it has been facing some tough challenges in FY2018. Moreover, Thai Beverage’s shares currently have valuations that are more expensive than the market. The saving grace here is that the company managed to generate a solid ROIC of 26.5% in FY2018, which is commendable.


I hope the five things I’ve covered about Thai Beverage’s business fundamentals can help you make a more informed investing decision when it comes to its shares.


Click here nowfor yourFREEsubscription toTake StockSingapore, The Motley Fool’s free investing newsletter. Written byDavid Kuo,Take Stock Singaporetells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead.


TheMotley Fool’s purpose is to help the world invest, better.Like us on Facebook to keep up-to-date with our latest news and articles.


More reading



The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn't own shares in any companies mentioned.


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