Second Chance Properties Ltd. – Value Analysis (SINGAPORE:528) : January 3, 2017

Capitalcube gives Second Chance Properties Ltd. a score of 50.

Our analysis is based on comparing Second Chance Properties Ltd. with the following peers – Hour Glass Ltd., NEW ART Co., Ltd., MoneyMax Financial Services Ltd. and Metro Holdings Ltd (AGS-SG, 7638-JP, 5WJ-SG and M01-SG).

Investment Outlook

Second Chance Properties Ltd. has a fundamental score of 50 and has a relative valuation of OVERVALUED.

Fundamental Score

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Company Overview

  • Compared to peers, relative underperformance over the last year is in contrast with the more recent outperformance.
  • Second Chance Properties Ltd’s current Price/Book of 0.68 is about median in its peer group.
  • The market expects faster earnings growth from 528-SG than from its peers and also a turnaround in its current ROE.
  • 528-SG‘s relatively high profit margins are burdened by relative asset inefficiency.
  • Compared with its chosen peers, the company’s annual revenues and earnings change at a slower rate, implying a lack of strategic focus and/or lack of execution success.
  • Over the last five years, 528-SG‘s return on assets has eroded from above median to below median among its peers suggesting declining relative operating performance.
  • The company’s relatively high gross and pre-tax margins suggest a differentiated product portfolio and tight control on operating costs relative to peers.
  • While 528-SG‘s revenues have increased slower than peer median, the market currently gives the company a higher than peer median P/E ratio and may be factoring in some sort of a strategic play.
  • The company’s capital investment program suggests it is under-investing in a business that is producing peer median returns.
  • 528-SG has additional debt capacity.

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Leverage & Liquidity

528-SG has additional debt capacity.

  • With debt at a reasonable 28.33% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 22.76%), and a well-cushioned interest coverage level of 9.35x, 528-SG has the capacity to borrow some more.
  • All 4 peers for the company have an outstanding debt balance.

528-SG has moved to a relatively high liquidity from an Some Capacity profile at the prior year-end.

  • 528-SG‘s interest coverage has increased 3.59 points from last year’s low but is still below its four-year average interest coverage of 23.40.
  • The increase in its interest coverage to 9.35x from 5.76x (in 2015) was also accompanied by an increase in its peer median during this period to 9.35x from 5.76x.
  • 528-SG‘s debt-EV has declined 12.17 percentage points from last year’s high but remains above its four-year average debt-EV of 24.63.
  • The decrease in its debt-EV to 28.33% from 40.50% (in 2015) was also accompanied by a decrease in its peer median during this period to 22.76% from 32.66%.
  • Relative to peers, debt-EV fell 2.27 percentage points. Unlike the peer median, it is also above the 25% leverage benchmark.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Hour Glass Ltd. 12.26 5.6 30.8 81.76
NEW ART Co., Ltd. 19.08 1.79 97.21 84.57
MoneyMax Financial Services Ltd. 73 1.43 2.62 6.61
Metro Holdings Ltd 22.76 4.23 -1975.44 35.43
Second Chance Properties Ltd 28.33 0.96 9.35 10.96
Peer Median 22.76 1.79 9.35 35.43
Best In Class 12.26 5.6 97.21 84.57

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Company Profile

Second Chance Properties Ltd. operates as an investment holding company, which engages in the retail of ready-made garments and holding of property as investment for rental income. It operates its business through the following business segments: Wearing Apparel; Gold and Jewellery; Investment Dealing; and Property Rental. The company was founded by Mohamed Salleh Marican in June 1975 and is headquartered in Singapore.

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