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This Growth Company’s Earnings Are Up Nearly 1,500% In 10 Years: 2 Things Investors Should Know

Investors tend to not link the terms ‘growth company’ with ‘construction and real estate development.’ But in Singapore’s stock market, there is a property developer and construction outfit that has displayed stupendous growth over the years.

That company is Sim Lian Group Ltd (SGX: S05). Sim Lian, which also invests in real estate, conducts business mainly in Singapore. It has relatively small business interests in Australia and Malaysia. Sim Lian’s Property Development segment is its largest, accounting for around three-quarters of its total revenue in its fiscal 2015 (fiscal year ended 30 June 2015).

As I mentioned, the company has had a track record of solid growth. You can see this in table below, which shows the company’s revenue and earnings growth in its last 10 fiscal years:

Sim Lian Group's revenue and profit.
Source: S&P Global Market Intelligence

From fiscal 2005 to fiscal 2015, Sim Lian’s revenue and earnings per share have compounded at annual rates of 23% and 31.7%, respectively. Growth rates have slowed in more recent years but are still in the mid-teens range (the compound annual growth rates for revenue and profit from fiscal 2010 to fiscal 2015 are 12.5% and 16.8%, respectively).

It’s worth mentioning that Sim Lian was founded by Kuik Ah Han. The company is still majority-owned by the Kuik family today, who collectively control 66.16% of Sim Lian’s shares as of 15 September 2015. The Kuik family members are also active managers within the company. For instance, Kuik Ah Han is the executive chairman of Sim Lian. His son, Kuik Sin Pin, is the chief executive officer.

As the Kuik family are both owners and operators of Sim Lian, there seems to be at least some alignment of interests between them and minority shareholders of the company.

Alignment of interest can be somewhat of a judgement call and there’s likely no right or wrong answer. But there’s one thing we do know for sure: Minority shareholders of Sim Lian haven’t done too badly. In the last five years, shares of the company have gained 88% in price alone. This compares with the Straits Times Index’s (SGX: ^STI) 10% decline over the same period.  

A Fool’s take

So in sum, investors may want to keep in mind two things about Sim Lian. First, it’s a company with a great track record of growth. Second, it’s a company that’s majority-owned and still run by its founding family.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.