My S.W.O.T Analysis For Chip Eng Seng (C29)

CES Share price

This article will serve as a competitor analysis or follow-up of my recent article on My S.W.O.T Analysis For Wee Hur (E3B). I was highlighted about this company by one of our readers and thought it would make for a great article to compare how these two companies differ.

 

Strengths

  1. Net-Net Positive
  2. Skin In The Game

Net-Net Positive

CES Net-Net

 

Similar to Wee Hur, Chip Eng Seng(CES) also enjoys a positive Net-Net, thanks to its Current Asset heavy and Fixed Asset light structure. However, Chip Eng Seng doesn’t enjoy the same benefit of it’s net-net/share to be greater than existing share price of S$0.64. But nonetheless, CES remains in a good cash position to take up opportunities that arises with 442m of the 1.37b current assets in cash.

Skin In The Game

Management has a good amount of skin in the game and I like it. Enough said!

Weaknesses

  1. Management Changes
  2. Remuneration
  3. High Debt/Equity Ratio

Management Changes

Succession

In CES’ 2015 Annual Report, we learnt that Mr Lim Tiam Seng, the Executive Chairman and Founder of CES who is now 78 has decided to take a backseat and taken up the role of Adviser, allowing Mr Raymond Chia, 50, his son-in-law to run the show now. It’s an eventual move, but it’s not too much of a worry because Mr Raymond Chia has been the Group’s CEO and Executive Director in the past. A short search on Mr Raymond Chia confused me a little while. He was CES Group CEO and then resigned to “pursue personal interest”. In fact, he went off to set-up a new company, LGB Corporation, which is also involved in property development and had plans to list it on SGX as well. And now he’s back at CES.

 

Remuneration

Remuneration

Comparing CES’ remuneration to Wee Hur’s one, I much prefer Wee Hur’s remuneration policy. Take a look at Wee Hur’s remuneration policy and you’ll know what I mean. Below is Wee Hurs’:

Wee Hur Remuneration

High Debt/Equity Ratio

HeaderCES DE Ratio

CES finances most of its projects via Debt. So investors would be wise to look into their debt structure and repayment abilities. While they may have no issues paying off their debt, do think about the possible repercussions of high debt levels. On the other hand, Wee Hur’s Debt/Equity Ratio is at a more comfortable level.

Header

Wee Hur DE Ratio

Opportunities

From Cyclical To Stability

Similar to Wee Hur, CES saw the need to move into a more stable and recurring income. However unlike Wee Hur who went into the Dormitory business, CES went into the Hospitality business.

“Operated by one of Asia’s most established hospitality brands, Park Hotel Group, Park Hotel Alexandra marks the Group’s first foray into the hospitality industry. In the medium term, the Group
plans to focus its efforts on building up the fundamentals of its maiden hospitality asset and remains encouraged by the steady growth in overall occupancy rates so far. The Group expects the hotel to improve its performance in 2016.” – Annual Report 2015

I think we can expect to see more hospitality projects taken up by CES in the years to come as the group seeks for a more stable source of income. With Singapore’s tourism industry looking a little dismal, I am expecting to see more of such projects overseas instead.

Threats

  1. Poor Occupancy Rate
  2. Persisting Weakness In The Property Market

The threats faced by CES is largely the same as Wee Hur, namely persisting weakness in the property markets and occupancy rates.

 

Conclusion

Chip Eng Seng has been run very successfully by Mr Lim Tiam Seng to where it is today, and he must begin to hand it over to the next generation to run. The foundation has all been set and all that’s left to see is how Mr Raymond Chia will take it to the next level. However with that said, I still prefer Wee Hur over CES as its balance sheet is more prudent and the Founder is still running the company there.

Aloysius Lee

Aloysius has been investing in Singapore Equities from the age of 18 and is still madly enthusiastic about it. He strives to sharpen his edge while guiding others along the way to snowball their way to financial freedom!

6 thoughts on “My S.W.O.T Analysis For Chip Eng Seng (C29)

  • June 13, 2016 at 1:22 AM
    Permalink

    Hi

    There will come a time when it is at a value which you deem it is over value to sell. What is your criteria for selling? Using your net net again? Thanks for your sharing generously.

    victor

    Reply
    • June 13, 2016 at 9:53 AM
      Permalink

      Hi Victor,
      There are many different styles towards selling. Some people choose to sell at NAV, and some will adopt a wait and see method. I might adopt a wait and see method to see if speculators will take over and push the prices to higher levels to increase my returns.

      Reply
  • June 21, 2016 at 12:47 PM
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    Hi Aloysius

    I would like to know why you use Current assets and not the Total assets in the formula.
    Thanks again for great sharing.

    victor

    Reply
  • June 21, 2016 at 1:12 PM
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    Hi

    This is addition to the comment above. If just base on the formula to arrive at fair value.Then can I say Lian Beng fail badly, and it a sell at 45c. Your opinion please. Thanks, I know disclaimer and I know value vesting is for long term, short term may subject to market sentiment and shock so I would not take it that your method is not accurate. Thanks again.

    victor

    Reply
    • June 23, 2016 at 12:36 PM
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      Hi Victor,

      Great to see your positive learning attitude! Keep them coming! I used Current Assets because it’s based on Graham’s Net-Net strategy (http://www.investopedia.com/terms/n/net-net.asp)

      I’m afraid I cannot comment on Lian Beng until I have done a proper analysis on my part!

      Reply
  • May 23, 2017 at 12:36 PM
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    Take note that FY2016 Remuneration band has reduce significantly…

    Above $1,000,000
    Chia Lee Meng Raymond

    $800,000 to $999,999
    Lim Tiang Chuan

    $600,000 to $799,999
    Hoon Tai Meng

    $400,000 to $599,999
    Dawn Lim Sock Kiang

    Reply

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