Excellent set of results. High Double digit growth with improving net profits and increasing mix of excellent products. Management is savvy in brand building, ambitious in aggressive expansion. Influx of joint ventures with well known brands.
What else more can you expect ? Dividends are for stable companies. Not giving dividends is a sign of a growth company. Some companies tries to hard to please shareholders with dividends after listing.To give dividends and yet at the same time borrow money which you have to pay the bank interest on unless the company can spend the money better like Hongguo, its wise management.
My previous post:
Hongguo International - Riding on The Needs Of Modern Woman
Cheers
Niversphere.
PRESS RELEASE – FY2005 RESULTS
SGX-LISTED CHINESE LEADING FASHION GROUP
HONGGUO FY 2005 NET PROFIT GROWS 33.8%
C Banner ladies shoes have become the second most popular shoe brand in PRC in FY 2005
Retail outlets increased to 615 at end of FY2005 from 487 a year earlier.
Growth propelled by continued strong demand for inhouse brands and increased capacity from higher production capacity in Nanjing and Dongguan
Group has achieved three-year compounded average annual growth rate of 29%
SINGAPORE – 20 February 2006 – Singapore Exchange Mainboard-listed Hongguo International Holdings Limited (“Hongguo” or “the Group”) announced today that its net profit attributable to shareholders grew 33.8% to RMB 70.8 million (S$14.45 million) in the financial year ended 31 December 2005 (“FY2005”), continuing its trend of sustained strong bottom-line growth.
The leading fashion group in China said the net profit was achieved on the back of a 44.2%- rise in revenue to RMB 424.5 million (S$86.6 million) in FY2005 from RMB 294.5 million (S$60.1 million) in FY2004, driven by the growing demand for Hongguo’s in-house brands. Hongguo has posted a compounded average annual growth rate of 29% since the start of FY2003, the year of its public listing. Earnings per share rose 38.5% to 0.18 RMB cent in FY2005 from 0.13 in FY2004 while Net Asset Value backing per share rose to RMB 0.79 as at 31 December 2005 from RMB 0.65 as at 31 December 2004.
The Group has benefited from the aggressive expansion of its distribution network, with the number of retail outlets increasing to 615 at the end of FY2005 from 487 a year earlier, exceeding previously announced estimates of 607 outlets. Retail sales, which contributed 87.3% to Hongguo’s FY2005 revenue, registered a 56.4% increase to RMB 370.8 million (S$75.7 million) from RMB 237.1 million (S$48.4 million) a year ago. To cope with rising demand for its in-house ladies’ shoes brands C.Banner and E.Blan, the Group has deployed more manufacturing capacity at its new plants in Nanjing and Dongguan, both of which were completed in FY2005, thus raising total annual production capacity to 2.52 million pairs of shoes, 50% higher than the 1.68 million of FY2004.
Hongguo also announced today that it would invest RMB 8 million to expand its design and logistics centre in Guangzhou. When completed by end of FY2006, design capability will increase from 1,000 to 4,000 models per year.
In line with its growth strategies, 100%-owned fashion brand distributor Jiangsu Unity Corporation (“JUC”), which was acquired in June 2004, contributed RMB45.9 million (S$9.37 million), or 10.82%, of the Group’s total revenue in FY2005. With more retail outlets, as well as a possible expansion in brand portfolio, JUC – which has distribution rights in parts of China for several well-known foreign fashion brands such as Ermenegildo Zegna, Max Mara and Byford – is expected to contribute more substantially to the Group in future. Two Tommy Hillfiger stores will open in FY2006.
Commenting on the FY2005 performance, Hongguo’s Managing Director, Mr Li Wei, said, “Our in-house brands have continued to gain ground and market share despite increasing domestic competition.
Our flagship “C.Banner” was recently named the second most recognised brand of ladies’ shoes in China by the China Industrial Information Issuing
Center.
The Group plans to increase the total number of retail outlets from 615 to 730 outlets by end of FY2006.
“We have invested in brand-building efforts, design capability as well as increased capacity and distribution network to stay ahead of the competition while achieving economies of scale and hence maintain operating margins. Demand for quality fashion wear in China continues to grow with rising affluence. With our combined strategy we are confident of continued growth in the near future,” he said.
About Hongguo International Holdings Limited
Hongguo, listed on the Mainboard of Singapore Exchange since 5 June 2003, is a specialised designer, manufacturer and retailer of fashion wear headquartered in Nanjing, China. With manufacturing facilities in Nanjing and Dongguan, Hongguo shoes (under inhouse ladies’ shoes brands C.Banner 千百度and E.Blan 伊伴) are available at over 615 points of sale across China’s major cities and provinces. In 2005, C.Banner was ranked second in terms of market share up from the third position it held for three consecutive years, according to an annual market survey of the ladies’ leather shoes industry conducted by the National Statistics Board of China. Apart from its principal business in footwear, Hongguo also wholly owns Jiangsu Unity Corporation, a retail management company distributing fashion brands such as Ermenegildo Zegna, MaxMara, Byford, G2000, U2 and Hugo BOSS in China.
For more information, please visit www.hongguo.com.
http://www.listedcompany.com/ir/hongguo/newsroom
/HongguoResultsPressRelease200206.pdf
Company Update : Hongguo Riding On The Needs Of Modern Woman
INVEST IN PRODUCTS & SERVICES
Even our feeble-minded caveman ancestors were clever enough to limit their investments to well-understood tools... like a club or stone axe-- and seldom ventured very far beyond unfamiliar territory to avoid unfamiliar predators. You too should be wise to the advantages of investing only in companies whose products and services you understand and in markets you are intimately familiar with.
Quite often, we regionalize our investments. We think we know and understand the local industry and the company where we work. Investors from Arkansas invest in Wal-Mart. Californians buy Silicon Valley stocks. Seattle residents feel comfortable with Microsoft, Boeing or Starbucks; Texans invest in the oil industry. New Yorkers feel they know the media and advertising industry. What is amazing is the number of Asian investors who seek out all these USA stocks on the other side of the planet!
However, you don't want to invest in auto manufacturers just because you drive a car or because you live in Detroit (or Thailand and China where many auto parts are manufactured today). Nor should Floridians buy Disney or orange juice makers, or Singaporeans buy Singapore Airlines just because they fly to Hong Kong once a year. It's more than just knowing something about the company that you're investing in and the products those companies make or the services those companies provide. You also need to know that the stock you're buying is an excellent value and that the company is part of a growing industry.
A good test is to ask yourself if you could explain your investments to a ten-year-old. That may help you determine whether or not you really know what you own.
The wild swings in share prices are really your friend. Be careful of groupthink that is so prevalent in the stock market. Warren often quote his teacher Ben Graham as saying, 'You are neither right nor wrong because the crowd agrees or disagrees with you. You are right if your principles, research, date, future projections, and reasoning are right.'
The major university head librarian who said about Buffett, 'You know, Warren is a great future investor,' meant that he is able to predict the future stream of earnings of a business and industry and buy it at a discount to its real value for the long term.
All investors must look into the future. In 1979 in Forbes magazine, Warren said, 'The future is never clear. You pay a very high price in the stock market for a cheery concensus. Uncertainty is the friend of the buyer of long-term values.' Buying when everyone is selling and selling when everyone is buying is the old adage on how to make money in the stock market, but that's easier said than done. However, if you know what you own and understand why it is such an excellent value, then you position yourself to take natural advantage of the adage.
Learning to understand what you own is a matter of learning to ask the right questions of the right people. Remember the story of the fellow standing next to a dog and a stranger approached and asked, 'Does your dog bite?' The fellow said, 'No,' so the stranger reached down and petted the dog and the dog bit him! Alarmed, the stranger said, 'I thought you said your dog doesn't bite.' The man said, 'Well, that's not my dog.' The moral of the story is to know to ask the right questions to the right people in order to truly understand.
Berkshire's largest investment of a partly owned business or stock is Coca-Cola, and it provides an excellent example of knowing what you own. As a young lad Buffett sold bottles of Coke door to door in his neighborhood, and as a teenager he was in the vending machine business with his pinball machines, but he didn't rely entirely on these early experiences to understand his billion-dollar investment.
For all of his early years and most of his adult life, Warren drank Pepsi-Cola, some say even that at one time if you cut his vein, Pepsi would come out instead of blood. So he personally understood the competition.
Next he read everything he could about The Coca-Cola Company: how it was founded, grew, and expanded, and its market share, international expansion, and management. Like GEICO thirty-five years earlier, Buffett could have written an extensive stock analyst's report of the security he likes best: Coca-Cola. After careful and thorough reading and research, he noted that Coke's management was buying back its own shares. The last thing he wanted to do was tip his hat and let management know he was interested in buying. So he quitely purchased $1 billion of the stock.
Like the average investor, Warren had no exclusive or insider information. Unlike the average investor, he studied and understood what he was buying. The soft-drink beverage business is not a very difficult business to know. Figuring out when it is selling at an excellent value compared to its future earnings is the genius part.
Coca-Cola earned 42 cents per share in 1989, so Berkshire paid 15.5 times what it was then earning with an average price of $6.50. Book value was $1.18 per share, so it paid 5.5 times book. Buffett was paid back with actual net earnings in 9 years, nearly one half of the projected earnings payback time. Meanwhile, book value has quadrupled, the stock price has climbed 7-times, Coke earns 3-times more than when it was first purchased, and management continues to buy back its shares (10% since Buffett's purchase), which gives the shareholders in essence a nontax dividend making the remaining 90% of shares more valuable.
Today Coke sells over 1 billion servings (out of a total of 50 billion) a day and continues to enjoy worldwide leadership of the soft-drink beverage industry. So with just 2% of the world market, Coke has enormous growth opportunities ahead.
This type of analysis is all very easy to do in hindsight and over a decade later. The difficulty is being able to see the wonderful investment opportunity in advance, which is what makes Warren Buffett's talent so profound.
Notice how patient Buffett is and hos thoroughly he understands what he is doing. A half-century after he was selling Coke door to door and more than a century after it was first formulated, he made a substantial purchase.
The husband of famed author and mystery writer Agatha Cristie was an archaeologist. 'That was the best occupation for a husband,' said Agatha, 'because the older things get, the more interested he becomes.' Warren invests like an archaeologist-- the older things become, the more interested he is.
Sage@wallstraits.com
Credits: Much of this article (with modifications) is extracted from Ch. 5 of Warren Buffett Wealth by Robert Miles, 2004.
Article excerpted from http://articles.wallstraits.net/articles/1358