There’s a quote said by Peter Lynch that “Know what you own, and know why you own it.
Yes, it is important to get your work done before settling on a choice or making a decision. When it comes to investing in share market it is important to own a strong portfolio. Furthermore, once you’ve settled on a choice, make a point to reexamine your portfolio on a convenient premise. And most importantly, you should know why you are owning a portfolio.
For getting good returns one must update his portfolio, so we examined a couple of Singapore-listed companies that are intriguing and you can add these to make your portfolio more profit yielding. In this article, we chose a well established Singapore-listed company, “United Global Limited“.
We covered United Global’s core business, financial performance and it’s growth factors.
Let’s talk about it in details- Company’s Overview
United Global Limited is an established independent lubricant manufacturer with a wide range of high quality, well-engineered products under our in-house brands such as “United Oil”, “U Star Lube”, “Bell1”, “Hydropure” and “Ichiro” and supplies products over 30 countries as well as for third-party principals’ brands. Additionally, the company is in the trading of base oils, additives and lubricants.
The company mainly serve the automotive, industrial and marine industries, can customize its products and production volumes to cater to specific customers’ needs which is one of the company’s competitive advantages. In 2015, over 80% of United Global’s income was from rehash clients – this exhibits the customer stickiness of its business.
The company, listed in Singapore’s stock market on 8 July 2016.
The Financial Performance
Before investing in a company it is crucial to do some research on its financial performance. United Global’s income had declined from US$102.1 million to US$99.8 million between the year 2013 to the year 2017.
Note- The organization has a 31 December year-end
As indicated by its 2016 yearly report, “the price of lubricants is driven more by the supply and demand of the base oils and lubricant markets, the branding of the lubricants and the availability of lubricants with the respective specifications.”
Even after the fall in the revenue, the company’s gross profit margin ascended from 10.6% out of 2013 to 18.5% out of 2017, with bringing down base oil costs conceivably having assumed a part in the change. Moreover, net benefit about tripled from US$3.3 million of every 2013 to US$9.2 million of every 2017.
Starting at 31 December 2017, United Global’s balance sheet conveyed US$10.6 million in cash and bank balances and US$9.0 million in complete borrowings.
The company generated an average of US$5.6 million in operating cash flow and incurred an average of US$0.7 million in capital expenditure in the year 2016 and 2017 which gives the company an average free cash flow of US$4.9 million.
What’s Free cash flow??
Free cash flow (FCF) is a measure of how much money a business creates subsequent to representing capital consumptions, for example, buildings or equipment. This money can be utilized to pay out dividends to shareholders, buy back shares, make acquisitions, or strengthen the balance sheet, in addition to other things.
Company’s Growth Factors-
Last year, United Global made few joint venture agreements, the company inked new joint venture deals with its partners in Taiwan, Myanmar, and Japan. This is notwithstanding its key partnership with CNOOC Oil & Gas (Taizhou) Petrochemical Co Ltd in 2015 to collaborate and market lubricant products in China and different markets.
United Global likewise finished a huge acquisition of its strategic partner in Indonesia – PT Pacific Lubritama Indonesia (PLI) – in July 2017. The acquisition has helped United Global to end up a significantly greater entity, with its storage capacity expanded by in excess of 12 times. In United Global’s 2017 annual report, the company added:
“With the acquisition, the integration of our successful operations in Singapore and Indonesia resulted in a much larger business with triple the blending capacity to power the Group’s growth amidst volatility and uncertainties in the global business environment. Post-acquisition, the Group is working towards realizing synergies by increasing business development efforts, ramping up the utilization of PLI’s blending plant in Indonesia, investing in key leaders and tapping on each other’s expertise and cost advantage.”
As indicated by United Global’s initial public offering (IPO) prospectus, the “world demand for lubricants is expected to rise 2.0% yearly through 2019, and the fastest gains are expected in the Asia-Pacific region, where more noteworthy number of motor vehicles in use and continued industrialisation in large countries such as China and India will bolster rising demand for lubricants.”
The low assessed growth rate for United Global’s market does not look attractive, but the rising middle class in this region should still bring about steady improvement in the business.
Moreover, the company has the potential for development in the years ahead with its different joint ventures and strategic partnerships. Presently, United Global is esteemed at around 11 times trailing profit and has a profit yield of 2.6%.
This is why Union Global Ltd is quite intriguing for the investment. If we left any point you can add below in the comment section. We would like to see your opinion and views.