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Annual Report: IFS Capital FY 08

A pretty decent set of results i would say, for a predominately small medium enterprise finance company.Below are the data computed by my Dividend Stock Tracker:

  • Debt actually went down, due to repayment of finance (264mil to 200mil).
  • Both operating cashflow and investing cashflow seems to be better. Operating cashflow benefited from more repayments of factoring receivables. Still yet to determine if this is a good thing. Investing Cashflow benefited from sale of investments net of purchases.
  • They are expected to be profitable in 2009, according to their description. I see it that companies are desperate for short term financing, and factoring arrangements are a source of how they do that. The management talked about increasing interest margins, something that comes along with higher risks that IFS takes.

Can they sustain their dividends?

The company is issuing bonus shares at 1 share per 10 shares owned. No pricing is set but its either you take this bonus shares or you received the 1 ct final div payout in May.

I think its a blatant move to keep as much cash as possible. In total, i do a conservative forcast and predict that next year’s div will be 2cts like this year. That will bring yield to around 4% currently. My cost yield at 79 cts is around 2.5% now.

This is just 6% of their operating cashflow, which means that they can actually pay out more.

I would think this dividend is definately sustainable.

Are they cheap?

Similar story to the one i say about MIIF. I think at 7.6 PE and 5.9 EV/EBITDA, there are cheaper stocks out there. This is a good price to buy at. And it looks like they are holding well as well. But there are so many pennies! that are net cash right now, it makes stock liek this look expensive!

somehow, i feel this company have shown that they can weather the current storm well. Lets see their next quarter results..


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Owen Teo

Wednesday 11th of March 2009

Small time businesses need more money than ever to pay its overheads rather then running its business. Hence, credit risk has gone up and therefore credit has tightened overall. On one hand, you slow down lending, so little new revenue. On the other hand, your exising customers also face credit tightening from other banks, so they may be in liquity crisis and you will face loan provising if they cannot pay when principal or interest is due. On the third hand, you have high overheads to pay while revenues is coming down and provisioning is increasing .....

Owen Teo

Monday 2nd of March 2009

Given current environment, you may have to analyse company's financial statement quarter by quarter. For example, Singapore's 2008 GDP grew by 1.1%, not bad. However, in Q4, GDP declined by 16.4% in Q4 2008 ! Generally all the banks' earnings have been downgraded although FY2008 NI decreased generally by only 40%. But most Q4 numbers were certainly ugly and it will carry forward to 2009.

Company's latest finacial forecast does not provide for quarterly number (obviously they do not want to show you how bad the number is), but we can definitely derive from its Q3 and 2008 full year number.

If you compare FY 2008 and Q4 2008 numbers, Q4 was a loss of S$1.8 million pre-tax and S$350k post tax !

If you think that Q4 number was a bit alarming, you would be shocked if you know that Q2 loan assets (including receivables) increased from S$277m to S$311m between Q2 and Q3 2008 and then declined sharply to S$256 million in Q4 2008 !

This means Company will be highly velnerable in Q1 2009 at least. Assuming zero provisions and same revenues as in Q4 2008, a decline of another 50% in bottom line is possible. Any new provisions will render it in red territories....


Sunday 8th of March 2009

thanks for the contribution. I'm with you that Q1 is gonna get alot worse. But i am wondering why short term financing will be this hard hit. If the small-time businesses do not require cash, then it only means that there are no business to go around such that they need any financing at all!

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