Singapore’s “Flyer” Of The Week: Blumont Group

StockMarketBoardShares in private equity outfit Blumont Group (SGX: A33), soared 15% to S$0.98 this week. The company, whose main interests is in providing sterilising and polymerisation services for the food and packaging industry, also has interests in mining and property developments.

Recently, Blumont reported a 44% rise in revenues for the first three months of the year. This was thanks to the sale of land, which it acquired four years ago at Falling Water in Pierce County, Washington. The company added that its sterilisation and radiation business, which remains its largest source of revenues, fell 14% in the first quarter.

Private equity companies are interesting outfits. Their returns come from a number of sources that include cash flow from the businesses they are invested in, sale of investments and interest earned on money lent.

In the main private equity companies are long-term investors, which mean that they tend to hold investments for many years. Their success comes from buying distressed assets at knock-down prices and waiting for a turnaround before disposing of them, hopefully at a profit.

Earlier this year, Blumont invested A$10m in Australia’s Celsius Coal to help fund the miner’s exploration and development programme. Whether this represents a bottom for the mining industry remains to be seen. But given the track record of private equity companies, we probably won’t know for a few years yet.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.