Aztech 1st Quarter Results

The Group registered an overall turnover of S$49.70 million and net profit of S$1.56 million for Q1 2010. Despite an increase in revenue from Electronics business, the Group saw a 26.5% decline in overall turnover compared to the same period last year mainly attributable to the lower revenue recognition for Materials Supply business after completion of phases I and II of the supply contract.


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My short views:

1) Electronics Segment
As expected, revenue is rather stable. Nothing surprising.

However, the LED segment has made headway by securing a contract to install their lights at Changi Airport. This should be contributing well to the next quarter's profit.


2) Material Supply
I guess this is what can be expected of an industry based on big contract jobs on longer timeframes. Once a contract has been completed, there will be a time lag before the next contract is secured. Especially so when it is a new arm without much completed projects to brag of yet.

The decline is due to the completion of the phase 1 and 2 of their earlier contracts in 2009. In this segment, Aztech needs to secure more contract in the pipeline. Just like a property agent, income comes per contract, per job done.


3) Marine Logistics

Again, like the electronics segment, it appears rather stable. On an expansion path here.


4) Food business
This is the interesting portion. I wonder how it will turn out. Guess I have to wait for the next financial report to see the impact of this business venture.


All in all, nothing impressive, but nothing bad as well. All looks expected. It appears that Aztech is actively reducing it's gearing. Their gearing has reduced to 38% from 44% last year.

The net margins of 3.1% is low, but my opinion is that it's hard to quantify when a company is on it's expansion phase. When a company is embarking on a growth plan, we should monitor more carefully how it manages its newly taken on debt for the expansion. In this case, I would think Aztech has been prudent in paring down its gearing quarter by quarter.

Cash level has dropped too, but in my opinion, the cash would likely have been spent on reducing debts and/or giving dividends to shareholders (XD 23rd Apr).

My only concern is that the inventory turnover days has increased. On a side note, we don't buy new lights or modems every so often, so perhaps this rate would fluctuate quarter on quarter, year on year. I will have to craft out some time somewhere to look through older data to see if this is what's happening.

Meanwhile, I shall just enjoy the $387.50 dividends I will be receiving soon!