welcome onboard Pinky. You will get 3 sen dividend tomorrow

2.5 sen dividend going ex tomorrow

haha treasurehunt is so determined at selling off Caring, I would be glad if you are right on an imminent disposal at RM1.3 bn or higher.

Pls go and advise VT & team and try get a buyer fast

Either way, SEM share price will go past RM2.38 eventually to beyond RM4.00.

Good closing today!

yes another RM400 million will be needed to expand 7-Cafe outlets to 1,000. SEM may fund it through 2 years of operating cash flows or selling all or part of Caring.

But I do not think it will go expand so rapidly (add 1,000 outlets in 2 years), maybe current pace of 100-150 outlets per year is ideal, or could go higher at 200-250 outlets per year if it manages to sell Caring

share price rebound is on the way. I think this round the share price uptrend will be fast as weak holders and goreng kaki have been washed out, now left only VT to control the price movement

@Amazonboy, agree with your comment. VT must believe that SEM is worth way higher than RM2.38 as he got the company to buy back shares up to RM2.38. He must also believe that Caring is worth higher than RM1.3 billion price tag if he decides to hold on

VT oso want to make $$...we have to trust his judgment...since he believe can get higher price

Despite the encouraging operating metrix, I still think a deal on Caring should be forth coming soon. Lets go for a good lunch, and will see SEM share price rebound in the afternoon

Lease liabilities are a class of liabilities but are not strictly borrowings. In the case of SEM, lease liabilities are mainly shop rentals that it enters with shop owners for tenancy of 2-5 years for its over 2000 shop outlet. Current accounting method calls for capitalising of such long term tenancy as a form of liabilities. These lease liabilities are charged out in part in the P&L as lease interests and in whole in cashflow statements as lease liabilities interest & repayment.
So usually we do not add lease liabilities into total borrowings, I would normally treat it as an operating cost

RM1.3 billion price tag is good enough to me too, as SEM will pocket almost RM1.0 billion cash. It could pay off all its debts and still have RM450 million cash, and would be able to save RM30 million of interest costs a year

the share price collapse over the last 2 days might be caused by insiders selling or goreng kaki pulling off ahead of slowing of SBB, I do not know who

The volumes for these 2 days selling totalled some 7 million shares, and as you have kindly calculated, the net buying of SEM from other parties (other than company SBB) was 8.1 million shares from 7 Oct to 3 Nov, so the selling should ease off from today as most of these 8.1m share buyers should have sold off

of course, disposing of Caring now will give the share price a push, but what if the offeror sticks to RM1.3 billion offer?

but it is not up to us to decide whether to sell Caring or not, it depends on whether SEM can get a good offer

If SEM can get a valuation of RM1.5 bn to RM1.8 bn for Caring or a PER of 35x to 40x, then it will be a good value to monetise it

I agree with you that disposing of Caring at a good price is a good option for SEM now

Even after I factor in the depreciation & amortisation and the interest costs of RM63m, SEM would see its pre-tax profit jumping by over 100% in next 2 years

EBITDA is an important indicator as it excludes the non-cash items like depreciation and amortisation

As I already pointed out, SEM has very strong operating cash flows of over RM300 million a year, it will not have problems of lack of cash for expansion which just requires about RM75m a year
@treasurehunt, pls recheck your figures from SEM latest quarterly report

SEM convenient store business has already been registering encouraging growth in transaction value since it started the 7-Cafe business format, with transaction ticket per pax at RM8.43 for 2QFY2022 vs RM7.31 for 2QFY2021 or an increase of 15%.
It was reported that a 7-Cafe store registered an average transaction size of over RM12 per pax, compared to just RM6.00 per pax for a traditional 7-11 convenient store. As SEM converts more traditional 7-11 stores to 7-Cafe format (just like BJFood build more drive-thru format store of Starbucks), average transaction ticket will increase over time for the group convenient store business.

by then, pretax profit would jump by a much larger factor, i.e. RM800m (EBITDA) - RM194m (depreciation) - RM63m (interest costs) = RM543 million, or 185% increase from current level of RM190 million.
Applying a tax rate of 25%, net profit would come in at RM407 million or EPS of 33 sen.
Applying a normal PER of 20x, SEM would be worth RM6.60 per share.
Applying a 5-year average PER of 31x, SEM would be worth RM10.20 per share.

SEM has a huge fixed overhead costs (selling & distribution, administration costs), i.e. shop rentals, labour costs, electricity & water bills etc, of RM470m for 6 months ended 30 June 2022, or 26.4% of revenue.

If transaction per visit increases by 10% while fixed costs remain, revenue will increase by RM357 million a year and EBITDA will increase by almost the same amount to RM800 million giving an EBITDA margin of 22.5%, which would catch up to BJFood's level of EBITDA margin for FY2020.

True that SEM has a low net profit margin currently, but the better way to gauge its profit margin will be to look at its gross margin and EBITDA margin.

For the 6 months ended 30 June 2022, SEM registered revenue of RM1,783.6 million and gross profit of RM503.9 million giving a gross profit margin of 28.8%.
SEM's EBITDA came in at RM224 million or an EBITDA margin of 12.5%.

In comparison, BJFood had an EBITDA margin of 34% for FY2021 which is substantially higher than SEM EBITDA margin.
But if we look back a few years when BJFood had not achieved economy of scales for its Starbuck business, BJFood EBITDA margin was at 23.9% for FY2020 and 15.4% for FY2019. It was only when Starbucks embarked on aggressive expansion of its higher-margin drive-thru format stores from 2019 then its margin expanded very fast.

I see similar trend in 7-11 business as it expands on the high-margin 7-Cafe stores which enjoy almost double transaction per pax than traditional 7-11 convenient stores.

While SEM could distribute most its free cashflows as dividends, say RM185 million or 15 sen dividend per share (to give a 10% dividend yield), it could use the same money to buy back 10% of own shares at current prices and distribute the treasurer shares as dividends, in which case minority shareholders like us would still get 10% dividend yield.

I would prefer the latter where the company share price can be pushed up to a more reasonable level, i.e. RM2.00-2.50 as the company buys back the share. For cash dividend distribution, the share price will be adjusted down by 15 sen once dividend goes ex and share price has less support.

Part of this huge free cash flows have been used to aggressively buy back own shares, which may top RM33 million when it hits 10% max SBB. I would applaud such SBB given that the company has so much free cashflows of RM240 million a year

So after allowing for planned capex of RM75 million, SEM will still have free cash flows of RM315m - 75m = RM240 million or almost 20 sen per share for dividend distribution and debt reduction.

For the 6 months ended 30 June 2022, SEM registered operating cash flows (before capex) of RM157.9 million, annualised to RM315.8 million which is very strong.

Capex incurred in the 6 months ended 30 June 2022 amounted to RM37.83 million, annualised to RM75.66 million, in line with what SEM CEO said on planned opening of 100-150 7-Cafe this year at average RM500k per store.

SEM total borrowings amounted to RM745.3 million, minus off cash holdings of RM197.4m, net debt is at RM547.9 million only, not RM1.4 billion.
Interest payment for 6 months ended 30 June 2022 amounted to RM15.368 million, annualised to RM30.7 million, implying an average interest rate of 30.7/745.3 = 4.1% which is deemed reasonable.
Interest received for 6 months ended 30 June 2022 amounted to RM1.346 million, annualised to RM2.69m, implying an average interest income rate of 2.69/197.4 = 1.36% inline with normal bank deposit rates.

But I do reckon that SEM share price correction today was just too drastic, many got caught as company share buyback did not push it up at last minute, as the company had collected 1.8m shares during the day trying to defend the selling but failed miserably

VT counters are exciting because he is a master in corporate deals. I remember BJFood was also on a rapid uptrend from 2.00 level to above 4.00, spurred by a couple of good quarterly results and company share buyback. Though VT was selling BJFood shares in open market, but BJFood share price kept going up due to SBB and more retail investors participating on valuation ground. BJFood did suffer a big share price correction along the way but quickly rebounded, now to all time high again close to 1.00 (or RM5.00 before bonus) today

anyway, I did not buy SEM bcoz of pang72 comments, I bought way before at average cost of 1.56.
I bought SEM due to its attractive valuation then. Its convenient store business kicked in substantially higher profits in past 2 quarters after achieving economy of scale and higher margin from its successful launch of 7-Cafe.

Of course, the driver of this counter was definitely the news of it disposing Caring at a good price. But as I said, even though SEM does not manage to get the valuation of RM1.5-1.8 billion that it wants for Caring, it is not in a hurry to sell it.

Retail pharmacy chain is a resilient business with still growth potential, Caring has some 210 outlets, compared to over 500 for Guardian. And it is just about to get into East Malaysia by looking at JOM Pharmacy chain with 15 outlets in Sarawak.
SEM could grow Caring into a bigger chain organically or by M&A, I will not be surprise if Caring becomes a chain with 400 outlets in 5 years.

ah pang72 is back, thought you have dumped and gone

I did take some little profit at 2.38 but most of my holdings get stuck. Will hold for few more weeks to see

could it be the whole story was just made up by The Edge weekly, coupled with some goreng kaki to pump and dump? only time will tell...

2 weeks of gains is gone in one day, pufff

oh pang72 is gone, so fast. pump and dump

I think the aggressive SBB serves a few purposes, no.1 is obviously to push up the share price of SEM so that VT & Co can take some profit, no.2 is for a potential share dividend distribution of 5% to 9% then it can buy back shares again, no.3 is to show that its Caring subsi is potentially worth a lot and its convenient store business can cover any loss of earnings after selling Caring, No.4 is to lift the market cap of SEM to a higher level so that it could raise more funds if necessary by pricing any right issue or private placement higher

Just speculating, VT is the master

The management may think that the RM1.3 billion offer for Caring was a little too low, and SEM could get better valuation even if it lists up Caring as a separate listing, by expanding its network into Sarawak and increasing total pharmacy outlets towards 250 or more.

As said before, even there is no deal on Caring now, SEM is still grossly undervalued at RM2.00 level, given that the value of Caring has emerged with proposals from Japanese groups back in July and interests from US private equity funds, and its core convenient store business is charging ahead

I was right yesterday that SEM share price would need to take a breather, but did not expect such a big correction. Support at 2.00. I suspect it needs to consolidate the gains for a while before it resumes uptrend, all depending on whether a deal is coming or not

amazing that company share buyback is still aggressive, after share price has gone up 50%.

It seems like the uptrend is just half way to eventually RM3.20, now taking a breather. It needs a good news to drive it up again.

With or without the Caring deal now, it does not matter too much, as SEM can continue growing Caring into a bigger animal.

The Edge reported last weekend that Caring was close to sealing a deal to buy over a pharmacy chain in Sarawak with some 15 outlets there, that would increase Caring outlets by over 7% straightaway (and hence valuation) and give it an instant foothold in Sarawak.

SEM could even consider spinning off Caring to a separate listing later if it cannot not get the required valuation of RM1.5-1.8 billion now. By continued improvements and expansion, Caring could expand to over 300 outlets in next few years and valuation will definitely jump to over RM2.5 billion then.

Another day of good gains!

Tonight go to 7-11 again to buy ice-cream

SEM plans to have a total of 130 7-Cafe by end of 2022, soon this will come to Perak and other states. Next year I hope to see at least 500 7-Cafe outlets which will help to grow revenue by double digits

7-11 can have high growth in many years to come, both from expansion of new outlets and converting existing convenient store format into 7-Cafe format which enjoys almost double transaction of RM12.00 per head.

Just imagine if SEM converts most of its 2,400 convenient stores into 7-Cafe format, revenue will just double, with even higher profit margin of 3.9% as seen in Q2FY2022 compared to 1.8% in H1FY2021

I was hoping to collect towards 1.02 but it looks like no chance for now, so just buy at 1.12

Nepo, I trust you. I have also added. This is a well managed company with tremendous growth over many years to come.

profit takers fail to press it down, SEM maintains at 2.29-2.30. Hope for a strong close again with double digit gain today

I thought I would need to wait till 4.50pm for SEM to touch 2.30, but it looks like it is a combination of retailers / insiders chasing and company share buyback in the morning to push it high.

Could there be a lunch time announcement?

Enjoy your breakfast at 7 Cafe!!

I enjoy my white coffee at home while watching SEM notching up another 10 sen, nice morning

Haha I shall buy bread and slurpee drinks from 7-11 instead of ice-cream from Family Mart.

Too bad, there is no 7-Cafe in Ipoh yet, so I have not visited any, otherwise will have my afternoon tea there too