Thursday, September 17, 2009

Troubled Companies: ASA Group Holdings (A25)


Continuing with analyzing troubled companies, I found ASA Group based on its declining revenues since 2004.

Company Info:

ASA Group Holdings Limited is a Singapore-based investment holding company. The Company operates in manufacturing and selling ceramic tile.

IPO Detail:

The IPO was around 10 years ago, so I shall not state much details. A quick check at the list of Executive Directors at the IPO and the current list show that not surprisingly, none of those in the IPO are still around.

Competitive Strength in IPO:

The directors of the Group believe that it produces one of the leading brands of high-end ceramic tiles in China. The Group considers the following to be among its competitive strengths:-

* Established brand name of ‘‘ASA’’ supported by heavy marketing and promotional efforts through television and bus advertisement and participation in trade shows.
* A wide distribution and service network via its 37 branch offices and more than 1,500 distributors and dealers located mainly in eastern, south-western and northern China.
* Strong design capabilities via its in-house Design Department.
* Wide range of products in over 200 designs to meet the tastes and demands of different consumers.
* Fully automated production lines which help to maintain the quality of ASA ceramic tiles.
* Strategic location of its factory with easy access to canals for raw material supply and the railway stations.

Competition:


* Xiandai
* Pan Asia
* Prince
* Importers of foreign ceramic tiles

What happen?


Using the annual reports of FY2008 and FY2007 to find the reasons and challenges.

FY2008
* Natural disasters in China
* Stringent environmental controls since ceramic contribute to air pollution
* Bank of China tighter credit control

FY2007
* Chinese government curbing price of real estate
* Credit tightening policies imposed on banks
* Fierce competition in both domestic and international ceramic tile markets
* Increasing demand for raw materials
* Higher labor costs
* Higher requirements for environmental protection

Interesting development:


Shanghai Jinming Investment has bought the share at $0.09, a premium over its existing price. Not sure how big the company is since it is private. Technically, the company must have seen some value in the company or perhaps its asset. Also, Mr Poh Choo Bin has also slowly accumulate shares of ASA. A quick check shows he was a Substantial Shareholder of Viz Branz. I am going to buy a small amount of the share and hope that the buying of Shanghai Jinming indicates their positive sentiment to ASA.

Investment tips:


Technically speaking on the balance sheet, the future is still bleak for ASA Group. Their recent half-year statement shows revenue still falling about 41%.


References:

  1. ASA Investor Relation Website
  2. SGX - ASA Group IPO in 1998
  3. SGX - ASA Group Annual Report FY2008
  4. SGX - ASA Group Annual Report FY2007
  5. SGX - Shanghai Jinming taking 24.37% shareholding



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