Latest news with #RM4.1m
Yahoo
5 days ago
- Business
- Yahoo
Solid Earnings May Not Tell The Whole Story For Rex Industry Berhad (KLSE:REX)
Rex Industry Berhad's (KLSE:REX) robust recent earnings didn't do much to move the stock. We think this is due to investors looking beyond the statutory profits and being concerned with what they see. We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free. In high finance, the key ratio used to measure how well a company converts reported profits into free cash flow (FCF) is the accrual ratio (from cashflow). The accrual ratio subtracts the FCF from the profit for a given period, and divides the result by the average operating assets of the company over that time. You could think of the accrual ratio from cashflow as the 'non-FCF profit ratio'. As a result, a negative accrual ratio is a positive for the company, and a positive accrual ratio is a negative. While it's not a problem to have a positive accrual ratio, indicating a certain level of non-cash profits, a high accrual ratio is arguably a bad thing, because it indicates paper profits are not matched by cash flow. Notably, there is some academic evidence that suggests that a high accrual ratio is a bad sign for near-term profits, generally speaking. Rex Industry Berhad has an accrual ratio of 0.26 for the year to March 2025. Unfortunately, that means its free cash flow fell significantly short of its reported profits. Even though it reported a profit of RM6.33m, a look at free cash flow indicates it actually burnt through RM19m in the last year. It's worth noting that Rex Industry Berhad generated positive FCF of RM4.1m a year ago, so at least they've done it in the past. The good news for shareholders is that Rex Industry Berhad's accrual ratio was much better last year, so this year's poor reading might simply be a case of a short term mismatch between profit and FCF. Shareholders should look for improved cashflow relative to profit in the current year, if that is indeed the case. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Rex Industry Berhad. Rex Industry Berhad didn't convert much of its profit to free cash flow in the last year, which some investors may consider rather suboptimal. Therefore, it seems possible to us that Rex Industry Berhad's true underlying earnings power is actually less than its statutory profit. On the bright side, the company showed enough improvement to book a profit this year, after losing money last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. So while earnings quality is important, it's equally important to consider the risks facing Rex Industry Berhad at this point in time. To that end, you should learn about the 3 warning signs we've spotted with Rex Industry Berhad (including 1 which is concerning). Today we've zoomed in on a single data point to better understand the nature of Rex Industry Berhad's profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Yahoo
22-05-2025
- Business
- Yahoo
Investors Could Be Concerned With Sin Heng Chan (Malaya) Berhad's (KLSE:SHCHAN) Returns On Capital
To find a multi-bagger stock, what are the underlying trends we should look for in a business? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Having said that, from a first glance at Sin Heng Chan (Malaya) Berhad (KLSE:SHCHAN) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look. We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free. Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for Sin Heng Chan (Malaya) Berhad: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.0095 = RM4.1m ÷ (RM476m - RM45m) (Based on the trailing twelve months to December 2024). Therefore, Sin Heng Chan (Malaya) Berhad has an ROCE of 0.9%. In absolute terms, that's a low return and it also under-performs the Food industry average of 9.3%. See our latest analysis for Sin Heng Chan (Malaya) Berhad While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating Sin Heng Chan (Malaya) Berhad's past further, check out this free graph covering Sin Heng Chan (Malaya) Berhad's past earnings, revenue and cash flow. On the surface, the trend of ROCE at Sin Heng Chan (Malaya) Berhad doesn't inspire confidence. Over the last five years, returns on capital have decreased to 0.9% from 5.7% five years ago. Although, given both revenue and the amount of assets employed in the business have increased, it could suggest the company is investing in growth, and the extra capital has led to a short-term reduction in ROCE. If these investments prove successful, this can bode very well for long term stock performance. On a side note, Sin Heng Chan (Malaya) Berhad has done well to pay down its current liabilities to 9.5% of total assets. That could partly explain why the ROCE has dropped. What's more, this can reduce some aspects of risk to the business because now the company's suppliers or short-term creditors are funding less of its operations. Some would claim this reduces the business' efficiency at generating ROCE since it is now funding more of the operations with its own money. In summary, despite lower returns in the short term, we're encouraged to see that Sin Heng Chan (Malaya) Berhad is reinvesting for growth and has higher sales as a result. These trends don't appear to have influenced returns though, because the total return from the stock has been mostly flat over the last five years. As a result, we'd recommend researching this stock further to uncover what other fundamentals of the business can show us. If you'd like to know more about Sin Heng Chan (Malaya) Berhad, we've spotted 4 warning signs, and 2 of them are significant. For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
14-04-2025
- Business
- Yahoo
DPI Holdings Berhad's (KLSE:DPIH) Returns On Capital Tell Us There Is Reason To Feel Uneasy
When researching a stock for investment, what can tell us that the company is in decline? Typically, we'll see the trend of both return on capital employed (ROCE) declining and this usually coincides with a decreasing amount of capital employed. This combination can tell you that not only is the company investing less, it's earning less on what it does invest. Having said that, after a brief look, DPI Holdings Berhad (KLSE:DPIH) we aren't filled with optimism, but let's investigate further. Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for DPI Holdings Berhad: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.045 = RM4.1m ÷ (RM97m - RM7.9m) (Based on the trailing twelve months to November 2024). Therefore, DPI Holdings Berhad has an ROCE of 4.5%. In absolute terms, that's a low return and it also under-performs the Chemicals industry average of 7.9%. Check out our latest analysis for DPI Holdings Berhad Historical performance is a great place to start when researching a stock so above you can see the gauge for DPI Holdings Berhad's ROCE against it's prior returns. If you're interested in investigating DPI Holdings Berhad's past further, check out this free graph covering DPI Holdings Berhad's past earnings, revenue and cash flow. We are a bit worried about the trend of returns on capital at DPI Holdings Berhad. To be more specific, the ROCE was 11% five years ago, but since then it has dropped noticeably. Meanwhile, capital employed in the business has stayed roughly the flat over the period. Since returns are falling and the business has the same amount of assets employed, this can suggest it's a mature business that hasn't had much growth in the last five years. So because these trends aren't typically conducive to creating a multi-bagger, we wouldn't hold our breath on DPI Holdings Berhad becoming one if things continue as they have. In the end, the trend of lower returns on the same amount of capital isn't typically an indication that we're looking at a growth stock. In spite of that, the stock has delivered a 29% return to shareholders who held over the last five years. Either way, we aren't huge fans of the current trends and so with that we think you might find better investments elsewhere. DPI Holdings Berhad does come with some risks though, we found 2 warning signs in our investment analysis, and 1 of those can't be ignored... For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
