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Aztech Group Ltd Set For A Great Year

Aztech Group Ltd (SGX: 560), one of the smallest conglomerate listed in Singapore, saw a sharp decline in its third-quarter result, year on year. Aztech Group has five operating segments which includes its electronics business, LED lighting business, material and marine business, and its food business under the Shiro outfit.

Its net profit for the third quarter of 2014 fell 17.7% year on year to S$2.0 million compared to S$2.44 million in the same quarter last year. This was mainly due to the reduced margin from the materials supply and marine logistics segment. Strong competition and inflationary pressures forced the company tobear the lower margin experienced by these segments.

However, if we look at its result for the first nine months of this year, it seems like Aztech Group is set for a very good year in 2014. Its revenue is up 59.5% year on year to S$252.1 million. Its gross profit is also up, growing  23.1% year on year to hit S$26.3 million. Its net profit for the first nine months of 2014 is up an impressive 60.6% year on year to S$5.5 million. Most of the revenue is still coming from its electronic business, contributing about 52.1% of the total nine months sales. Its electronic business focuses in networking devices such as gateways and routers. The company has also ventured into consumer household electronics such as vacuum cleaners, juicers, and kettles.

Its material supply and marine business is the second largest contributor, contributing about 46.6% of its revenue. The company spent S$12.5 million this year to acquire a shipyard at 15D Pandan Road on August 2014. The purchase allowed the company to strengthen its marine business and expand its offerings. However, the most important part of its shipping business is still the rental of its fleet which currently consist of 11 tugboats, 13 barges, 2 conveyor barges, 2 mooring boats and 1 launch boat.

Foolish Takeaway

With the multiple expansion through all its five segments, the company is set to record a great profitable year. One area of concern for investors might be its rising debt rate. The company has a gearing ratio of 0.89, an increase of 74.5% since the end of last year. Its current ratio also dropped to 1.13, and capital expenditure has more than doubled for the year. If the spending continues, the company might face a risk of overstretching itself. In an event of a slowdown in the economy, Aztech Group might face some serious risks. This worst case scenario aside, it seems the company is yet again scaling new heights.

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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 Stanley Lim does not own any companies mentioned.