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What Investors Should Know About Samurai 2K Aerosol Ltd’s FY2018 Earnings

Samurai 2K Aerosol Ltd (SGX: 1C3) is an aerosol coating specialist with a focus on the automotive refinishing and refurbishing industry. Some of its brands include Samurai 2K, Samurai and Kurobushi.

Earlier this week, Samurai 2K Aerosol announced its financial results for the full year ended 31 March 2018 (FY2018). Here are 10 things investors should know from the earnings announcement:

1. Revenue for FY2018 came in at RM90.0 million, surging 128.8% year-on-year. The rise was mainly due to higher sales volume, which was boosted by ongoing marketing efforts to introduce and promote Samurai’s aerosol products. These marketing initiatives were carried out through digital channels like social media, exhibitions and hands-on product demonstrations to potential customers.

2. Indonesia was the largest contributor to total revenue at 64.3%, with Malaysia coming in second at 27.2%. The rest of the sales was from Thailand, Vietnam, Philippines, United Kingdom and Singapore.

3. Gross profit improved by 117.7% year-on-year to RM38.7 million.

4. As cost of sales increased faster than revenue, gross profit margin for FY2018 came down to 43.0% from 45.1% in FY2017. The decline was largely due to the appreciation of Ringgit Malaysia against Indonesian Rupiah. This brought about lower export selling prices to Indonesia.

5. Net profit for the latest period ballooned more than fivefold to RM11.7 million, from RM2.2 million a year ago. Earnings per share went up 412.6% to 11.38 RM sen.

6. Samurai 2K Aerosol’s balance sheet strengthened for the year. As at 31 March 2018, the firm had RM39.3 million in cash and bank balances, and RM7.8 million in total debt. This gives a net cash position of RM31.5 million. In comparison, as at end-March 2017, the company had RM10.1 million in net cash.

7. Trade receivables climbed more than 700% year-on-year to RM25.2 million, mainly on the back of higher sales volume. The increase in trade receivables, however, is much more than the revenue increase of 129%. Trade receivables increasing at a much faster rate than revenue is a potential red flag.

8. For FY2018, Samurai 2K Aerosol generated cash flow from operations of negative RM1.1 million. A year ago, it generated a positive operating cash flow of RM5.1 million. As for capital expenditure, RM6.4 million was spent during the latest period while a year ago, the firm spent RM5.9 million. It had no free cash flow to speak of in both years.

9. The firm did not declare any dividend for FY2018, just like in FY2017.

10. Ong Yoke En, executive director and chief executive of Samurai, said:

“We continue to grow the Samurai business by carrying out sustained marketing efforts in all markets we are in. We remain committed to R&D, so as to create new patents and inventions to maintain our market competitiveness.

We were recently granted the “Single Head 2K System” invention patent by the United States Patent and Trademark Office. This gives Samurai the exclusive right to make, use, offer for sale, or sell this invention throughout the USA or import the invention into the USA. This holds great potential for us given the huge USA market. It will be Samurai’s next engine of growth.”

Yesterday, shares in the company closed at S$1.74, giving a trailing price-to-earnings ratio of around 45.

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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.