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Disappointing 1Q for Popular Holdings

popular-bookstore What started as a small start-up specializing in picture and comic books has grown progressively over the years to become the POPULAR Holdings Limited (SGX: P29) we know today, operating a total of 156 outlets across Singapore, Malaysia, and Hong Kong. Most of us are familiar with the Popular bookstores located in shopping malls aross Singapore, but Popular Holdings also operates other businesses.  Today the company divides its business into Retail, Property, Distribution, Publishing, E-learning and F&B; with the first 3 contributing the bulk of the revenue.

After the markets closed yesterday, Popular announced a dismal 1Q FY2014 earnings for the 3 months ended 31 July 2013. While the group’s turnover increased 12.1% from S$119.1 million to S$133.5 million, net profit slumped 19.5% from S$6.64 million to S$5.34 million. The increase in turnover can be largely attributed to the Property, Retail and Distribution segments, while lower profits were due to a rise across all expense categories. On top of that, a negative adjustment for the currency valuation on foreign operations dragged down profits by 32.2% from the previous year.

The category of “other operating expenses” shot up a whopping 317.8% as compared to last year. It was a result of an impairment loss of $3.1 million accounted for two unsold units of  18 Shelford. The Group’s profit before tax would have been increased by S$1.4m on a year-to-year basis if the impairment losses were excluded.

Commenting on the results, the group said that “Inflationary cost pressure on manpower and rental may not ease in the immediate term. The implementation of several property cooling measures by the Singapore authorities might further weaken the prospects of the sale of the Group’s property units”.

Nevertheless, the group is still cautiously positive and added that “it will continue to manage its business prudently. With a strong balance sheet, the Group remains confident in weathering the uncertainties ahead.”

As of 11 September 2013, the shares are trading at $0.265 with a Price-to-earnings ratio of 10.15 trailing twelve months. It has declared a dividend of $0.01 and it translates to a 3.77% dividend yield. Small investors can also take comfort in the fact that the company has been actively purchasing back its shares since the start of the year.

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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 contributor James Yeo doesn’t own shares in any companies mentioned.