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Singapore “Flyer” of the Week: Epicentre Holdings Limited

Who would have thought that Epicentre Holdings (SGX: 5MQ), which was the Falling Knife of the Week just two weeks back, would rise up from its grave to be this week’s Singapore “Flyer”?

The retailer of Apple products climbed 24.3% to close at $0.169 on Thursday, a day which saw Epicentre’s shares surge by 30%.

Two weeks ago, on Valentine’s Day, the company released its results for the first half of its financial year. Revenue was up 4.6% to S$93 million. But even though revenue had increased year-on-year, the firm still ended the period with a net loss of S$903,000. In the previous year, Epicentre’s net losses were at S$411,000.

The revenue rise was due to Epicentre’s strategy to focus on improving sales in existing markets. The growth was however, partially offset by the lack of revenue from an outlet at Marina Bay Sands after it was shut down for renovation works that lasted about 3 months.

During the six months ended 31 Dec 2013, gross profit for the company had decreased by S$1.4 million to $9 million. Naturally, this would have caused Epicentre’s gross profit margin to decline – and decline it did, from 11.6% in the previous year, to 9.6% currently.

There was a drop in the sale of higher margin third party brand products and that contributed to the reduction in gross profit. In addition, higher sales volume from Apple products that carries inherently lower margin had eroded the company’s gross profit margin.

Meanwhile, aggressive bundling and promotions that were undertaken by the firm had also contributed to the decrease in gross profit margin.

As of 30 December 2013, the firm had a cash balance of S$12.1 million and a total debt of S$8.6 million.

Epicentre is currently trading at 1.5 times its book value.

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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 Sudhan P doesn’t own shares in any companies mentioned.