I am an investor who looks for quality companies at a fair price.
Some companies perform better than others. One way to look for quality is to assess if a company manages to weather adversity by either adapting their business model or innovating to keep up with changing business conditions.
Speaking of challenges, 2018 has been a tough year for many companies. But there is a trio of companies that have weathered the storms and have put initiatives in place to grow in the future. It’s worth following these three companies to see how things pan out.
Kingsmen Creatives (SGX: 5MZ)
Kingsmen Creatives is a leading communication design and production group. The company does interior and corporate fit-outs as well as design and fabrication work for theme parks, exhibitions and events.
As an interior designer for luxury retailers, Kingsmen has been facing challenges as luxury spending has waned since 2015. As demand slows, the company is facing increasing competition and lower margins. As a result, the company’s net profit (after tax) has almost halved from S$19.1 million in 2015 to S$9.7 million in 2017.
Amid these challenges, the company signed a licensing agreement in February 2018 with Hasbro Inc (NASDAQ: HAS) to open NERF Family Entertainment Centres (“FEC”) around Asia. In an announcement earlier this month, Kingsmen said that it will open the first NERF FEC in Singapore at Marina Square, occupying 18,000 square feet on the mall’s ground floor. The FEC will feature multiple activity zones along with merchandise and food and beverage outlets. The new FEC is a first of its kind in Asia and is expected to open in the second half of 2019.
iFAST Corporation (SGX: AIY)
iFAST is a wealth management Fintech platform with assets under administration (“AUA”) of S$8.5 billion as at 30 September 2018.
With the increased volatility in stock markets, iFAST clients may pull their cash from its platform and adopt a “wait and see” stance. Despite the turbulence in the Hong Kong and Singapore stock markets this year, iFAST has continued to grow its AUA to record highs by offering a broader suite of products for its clients.
In addition, iFAST had also applied for a virtual banking license in Hong Kong (currently pending approval). It is also planning to spin-off part of its China business in a separate listing somewhere down the road.
The company continues to search for new avenues to grow its business and mitigate the impact of market volatility on its business.
Boustead Singapore Limited (SGX: F9D)
Established in 1828, Boustead is a conglomerate with three divisions dealing in water and wastewater treatment, energy-related engineering and real-estate solutions. Over the last three years, Boustead has seen two divisions, namely Energy-Related Engineering and Real Estate Solutions, suffer from tough operating conditions. Oil and gas prices collapsed in 2014, precipitating a global recession for related companies. Boustead has not been spared. Meanwhile, Singapore’s industrial real estate sector has been hit with over-supply and negative rental reversions, impacting Boustead’s ability to clinch projects with decent margins.
The group has managed to adapt to these challenges by venturing abroad for its industrial real estate, targeting countries such as Malaysia and Vietnam for growth. These efforts are only beginning to bear fruit as part of a multi-year initiative. In addition, Boustead has also made a S$19 million acquisition of a healthcare company called WhiteRock Medical which now forms their fourth division. The new division is serving the healthcare sector and is less affected by cyclical demand.
The Foolish Bottom Line
All three companies have shown resilience during tough times and managed to find ways to grow despite the challenges to their core business model. Being able to adapt and evolve to changing conditions is a sign of quality, in my view. While some of the initiatives are still in their early stages, investors who are keen should monitor the developments to see if they bear fruit.
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The Motley Fool Singapore contributor Royston Yang contributed to this article. Royston owns shares in Kingsmen Creatives, iFast Corporation and Boustead Singapore Limited.
The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. The Motley Fool Singapore has recommendations for shares of iFAST Corporation and Boustead Singapore. The Motley Fool Singapore writer Chin Hui Leong owns shares in iFAST Corporation.