Singapore’s Big Winner for the Week: Asia Fashion Holdings Ltd

Asia Fashion Holdings Ltd (SGX: GH3), a producer of high-tech and eco-friendly magnesium-based multifunctional construction boards, has ballooned by 41.7% since last Friday to close at S$0.085 on Thursday. With the Straits Times Index (SGX: ^STI) increasing by only 0.6% in the same time frame, Asia Fashion is a big winner in Singapore’s share market this week.

On 12 November 2014, the firm announced its third quarter results. Revenue surged more than 300% year-on-year to RMB167.5 million from RMB36.6 million a year ago. The strong top-line growth was due to an initial three-month contribution of RMB134.3 million from a recently-acquired new material business. The new material business contributed to 80% of Asia Fashion Holdings’ total revenue with the fabric business making up the rest.

Net profit came in at RMB8.1 million, a plunge of 77.8% year-on-year, due to increased expenses after inclusion of the new material business. Asia Fashion saw much higher operating costs and also experienced increased finance costs and income taxes.

Mr Neo Chee Beng, Executive Chairman of Asia Fashion, commented on the quarterly earnings:

“With the acquisition of our new material business, we have entered into a new era of growth. We are motivated with this set of improved results with the significant revenue contribution from our newly acquired new material business as it attested to our new growth strategy and business direction. Despite the increase in overheads which are essential to drive our future growth, the Group delivered a credible performance in the quarter.”

Investors ought to know that the firm is offloading its fabric business to focus on the new material business, which has higher margins and more growth potential. Typically, on average, the gross profit margins for the new material business and fabric business are at 30% and 12% respectively.

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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.