Examining San Teh Ltd’s (SGX:S46) past track record of performance is a useful exercise for investors. It allows us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess S46’s latest performance announced on 30 September 2017 and weight these figures against its longer term trend and industry movements. Check out our latest analysis for San Teh
Did S46 beat its long-term earnings growth trend and its industry?
I like to use the ‘latest twelve-month’ data, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This method allows me to examine many different companies on a similar basis, using the latest information. San Teh’s latest earnings -SGD5.1M, which, in comparison to last year’s figure, has become less negative. Given that these figures may be relatively myopic, I’ve created an annualized five-year figure for San Teh’s net income, which stands at -SGD8.5M. This shows that, although net income is negative, it has become less negative over the years.
We can further analyze San Teh’s loss by looking at what’s going on in the industry as well as within the company. First, I want to quickly look into the line items. Revenue growth over last few years has been negative at -4.49%. The key to profitability here is to make sure the company’s cost growth is well-managed. Looking at growth from a sector-level, the SG hotels, restaurants and leisure industry has been growing, albeit, at a muted single-digit rate of 2.42% over the prior year, . This is a change from a volatile drop of -7.50% in the last couple of years. This suggests that any recent headwind the industry is experiencing, the impact on San Teh has been softer relative to its peers.
What does this mean?
Though San Teh’s past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always difficult to envisage what will happen in the future and when. The most insightful step is to examine company-specific issues San Teh may be facing and whether management guidance has steadily been met in the past. I suggest you continue to research San Teh to get a more holistic view of the stock by looking at:
1. Financial Health: Is S46’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
2. Valuation: What is S46 worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether S46 is currently mispriced by the market.