Tea with AK71: The kindness of strangers.

There is a small part of an email a reader sent to me very recently which I feel like sharing but at the same time, a little corner of my mind tells me that maybe I shouldn't.

The reason why I feel like sharing is because it is something that the boy scout in me has always believed in. I feel that if we can make a positive difference in the lives of others, why not? 

If we can show some consideration to others and make the world a better place, isn't that a good thing? 

In our pursuit of wealth, we should not forget to extend a helping hand to those in need if we can.

The reason why I think I shouldn't be sharing is because I am afraid that I might be accused of self-promotion once again.

Then, I remember something a fellow blogger, SMOL, told me: "Be the mountain!"

Photo taken on a trip to Japan.

Here it is:

"We live in a dog eat dog world these days, and every where I look I see the ugliness of the human spirit. People 你争我夺。People 笑里藏刀。 So it's quite rare and heartening to see that there are people around - willing to share knowledge and help readers. And because of this, I don't just see a rotting world anymore-  I retain a bit of optimism for the future, a bit of belief in the human spirit, a bit of love for the world."

I am not ashamed to say that, reading this, I was almost moved to tears, especially in the state that I was in.

It is easy to become hard and cynical as we grow older in today's world. We lose our youthful optimism and trusting nature. 

It is hard to believe in the kindness of strangers and for some reason it is more so in Singapore and places like Singapore (example, Hong Kong).

Well, if we find it hard to accept the kindness of strangers, perhaps, we can be kind strangers to others instead. I dream of the day when the kindness of strangers will stop being a strange thing.

How should I end this blog post? Let me borrow from a quotation another reader sent to me and that is we should all "err in the direction of kindness."

Yongnam: A chance to accumulate cheaper.

If anyone is still wondering why Yongnam's share price plunged today, it is due to a 28.6% drop in quarterly net profit, year on year. The weakness in share price now has a reason.

The question to ask is whether this drop in net profit is because of an enduring change in Yongnam's businesses or is it a one off event?

Yongnam posted a quarterly net profit of S$ 8.6 million attributable to shareholders which is lower than the S$ 12.1 million a year ago. This is after a S$ 5.1 million provision for doubtful debt because Alpine Bau GmbH, the main contractor for the Downtown Line 2 MRT project, went bust.

Now, if this had not happened, Yongnam would actually have seen a 13.2% growth in quarterly net profit, year on year, instead. This tells me that Yongnam's underlying businesses are probably still doing well and that this provision, as long as it does not become a regular occurrence, does not have any long term impact.

There are three other points which I want to highlight:

1. Gearing has gone up a notch to 0.45x. This is not a bad thing if the borrowings are able to generate greater returns but we should always keep an eye on gearing.

2. Gross margin in the last quarter went under 20% to 19.4%. Ignoring the provision for doubtful debt, net margin is 11.9% which is still pretty good for a construction company but it tells us of the existence of rather significant cost pressure.

3. First half EPS now stands at 1.59c. Unless the second half results are so abysmal as to be a loss of more than 0.59c, Yongnam is fully capable of paying a dividend this year and going by what happened in the last two years, it would probably happen.

I put in a buy order at 28c last night and the stock also hit a low of 28c a share today. A total of 17 lots changed hands at 28c but, fortunately or unfortunately, my order was not filled.

If Mr. Market should continue to feel rather depressed about Yongnam in the coming sessions, I will make use of the opportunity to accumulate.

See Yongnam's presentation: here.

Related post:
Yongnam: Buy since price is more reasonable now?