my point of view their management team all are family & relatives how to improve on R&D. 2. Jewellery totally can't sell 3. Homecare products do not sell much only Ginseng coffee. onside factory in Plot 3 is almost empty and plot 42 on fake Jewellery, Water Filter, detergent & Toothpaste.
After its Q3/2022 quarterly report showing YTD Operating Cashflow of only 16m, market sentiment has changed and now becomes fearful, so, I think we may have seen a peak, unless next quarterly report can show substantially higher Operating Cashflow. Zhu Lian's yearly dividend payment cost is around 78m, to maintain its high dividend. If you linearly extrapolate 16m to full year, that is only 22m so, it will have to dip into its Net Cash chest. If you look at its Net Cash recently, it continues to decline as it dips into its Net Cash. So, you have to be confident that Zhu Lian can stop its Net Cash from declining, else, soon, it will have to cut its high dividends as it is not sustainable to keep paying 78m in dividends every year when operating cash inflow is much smaller. I suspect this stock can keep falling before it gets better, unless somebody knows that its underlying business will turn around. It's not fully without risk. Looking at its business, 37% revenues from Food and Beverages, 26% Health Nutritionals, 18% Personal Care, 10% jewelry, 9% others. The Covid pandemic has hurt its business, some temporary, some permanent because of consumer shifts to online purchasing. 70% of its revenue is exported to Thailand. So, hard to get an edge here and most players look at the Operating Cashflow as proof of a turnaround. The comparable number of this year's 16m is last year's >100m Operating Cashflow, so, that's a big big drop from last year. Even net of cash, based on last year's earnings, the business is priced at a P/E of 15 at RM1.91, meaning if this doesn't grow, then, it's rather expensive. I think this is why market doesn't know and price has been sideways range for 18 months. I like to think the next direction is up as Operating Cash of 16m is already so low, but who knows ... if that number keeps staying low, price can fall. Because of the uncertainty, a dividend investor's protection is to keep the total ownership of Zhulian to a small % of its portfolio, so that poor returns will not significantly impact one's dividend's portfolio.
ZHULIAN high dividend yield is not sustainable by the business. Last FYE EPS is only 8.33 sen. The year before 9 sen. Whereas Total Dividend paid is 3+3+3+3+5 special dividend = 17 sen, more than earnings. For now, it has a cash chest but that cash chest is declining as the business doesn't support the dividend payout.
A long term dividend investor's fears is a dividend cut. Right now, at RM1.85, the Dividend yield is very high since 17 sen / 1.85 = 9%. However, if long term dividend is 8 sen, then, the Dividend can get cut by nearly 50%, dropping that down to 4.5%. Why take the risk? Keep your money in EPF and earn 5%-6% safely.
The business model that relies on emotional connections with individuals is at threat. Something seems broken, as economies have reopened, yet, last Q EPS is weak at only 1.49 sen. Extrapolating gives 6 sen EPS for the whole year, that's not good.
Even if one is optimistic that ZHULIAN can earn 9 sen going forward in EPS and assuming we require 6% dividend yield (to be better than EPF), price needs to drop to RM1.50 before I am interested.
ZHULIAN operating cashflow is still negative for Q1/23. If company keeps losing monies, how can it continue to pay its high dividend of 3+3+3+3 + 5 special dividend. Eventually, that special dividend of 5 sen will get cut to zero. Then the table 3 sen quarterly dividend will get cut to zero eventually. Then what?
Basically ZHULIAN's business needs to make Operating Profit again to support its future dividends.
Or put another way, to support 3+3+3+3+5 sen dividend = 17 sen dividend needs 78 million payout. Investing activities may add 8 million. So, Operating Profit needs to get to 70 million in a year. Last Q1, Operating Profit is negative. How to make 70 million Operating Profit a year to support the 17 sen dividend? For sure, that dividend is going to get cut, if the business doesn't turn around.
So economies gloablly have reopened for nearly a year now. Yet, how come ZHULIAN cannot make an Operating Profit yet??? Something is broken ... the question is - is it broken permanently?
This is a multi-level marketing company initially distributing gold-plated jewellery through its channel. However, in 2021, jewellery accounted for about 10% of the total revenue. So when looking at Bursa companies which can be proxies for gold, I left out Zhulian but instead focus on others such as Poh Kong or Tomei. Refer to Are there Bursa proxies for gold? https://www.youtube.com/watch?v=CvdIyx3eAWA
I took the opportunity to exit my entire position in ZHULIAN at 1.9. I didn't make much money on price - the gains barely covers commissions. I made money via dividends. After subtracting all expenses, I made around 4.1% per annum returns from ZHULIAN, which beats FD, but didn't beat EPF. I didn't feel comfortable to continue owning ZHULIAN, relative to so many good investments out there to own when their prices are depressed. Hence, taking the opportunity to sell my small holdings in ZHULIAN to raise cash as my cash is too small as so many good investments when prices were lower this year. Thank-ful, I didn't lose monies in ZHULIAN. The business is better to avoid.
I do not disagree, there are strategies that could be put in place for solid gains regardless of economy or market condition, but such executions are usually carried out by investment experts or advisors. I speak from experience.
It's hard to predict the future until we see this month's inflation results. However, historical data consistently show that stocks tend to outperform bonds in the long term. Therefore, I'm staying in the market and focusing on selecting high-quality stocks. The challenge lies in identifying these stocks.
Agreed with most of the recent postings here. Revenue and profit keeps dropping but the Company continues to pay dividend above its EPS. That will slowly but surely dilute the company's cash holdings. However, substantial shareholders cum directors will be more happy to keep receiving dividends and other perks.
Over the years, Zhulian does not seem to receover from slowing business growth and profit. No new products are offered or any potential new business joint ventures to bring the company forward. Wonder how long the Company can continue to stay ahead of other competitors and changes in the industry.
Wow, I was extremely lucky to have exited completely, before Ah Beng started selling off his shares. I sold off at 1.90 at a small profit (due to dividends, but nothing on price gains). Now trading at 1.62/1.63. Is it worth to buy at 1.62?
The problem with ZHULIAN is that its earnings is still lower than the dividends paid out. For 9 months ending Q3/23, total EPS is only 4.89 sen. Annualizing gives 6.5 sen. It pays out 3 sen dividend every quarter and final quarter is 8 sen (+ 5 sen Special Dividend) for a total of 17 sen. The shortfall is 10.5 sen. Cost to ZHULIAN = 10.5 sen x 460m = RM48 million.
It's cash holdings has shrunk to RM161m. At this rate, in just 3+ years, all of its cash holdings will disappear if business remains status quo, to support dividends. It's cash holdings is only worth 35 sen, not RM1.62.
If it's business is able to generate 6 sen per annum, with risks of declining, noone would pay a P/E of more than 10 times in a declining EPS scenario. This declining business is worth 60 sen at the most.
Plus 35 sen cash gives 95 sen valuation. Hence, trading at RM1.62 looks expensive still, unless there is line of sight that its business is going to turn around.
Hence, everything depends on its business model.
The hard question is why did its EPS keep shrinking initially gradually every year and in 2023 appears to be accelerating in its fall?
2015: 12.5 sen 2016: 9.1 sen 2017: 11.5 sen 2018: 11.4 sen 2019: 10.8 sen 2020: 10.2 sen 2021: 9.9 sen 2022: 8.3 sen 2023E: 6.5 sen.
This decline is very persistent over past 8 years.
What has ZHULIAN management been doing the past 8 years?
Is this something in ZHULIAN's management powers to arrest the 8 years of EPS decline?
Recent price crash and recovery may not be the end of a longer term downtrend.
Looks Ah Beng is forced to stop selling for a while as price has crashed.
But he still owns 48 million Direct + 231 million Indirect = 279 million total Last round this month, he barely sold 1% of that and price crashed. There is no way he can realize the remaining 99% at 1.6. More likely, it will be around 0.5 if he really wants to exit. Of course, he might just be selling the 1% to raise spending cash, and still hold the 99% but it doesn't bode well long term for this company, if selling 1% causes price to crash. He picked the wrong time to sell - he should have disposed much earlier like 10 years ago when its price was rising exponentially with high volume.
With recent selling in December, and price crash, it will surely attract SEC attention.
And we know the 5 sen Special Dividend traditionally reserved for the coming Q4 is not sustainable anymore, when 9 months earnings is not even 5 sen, but 4.89 sen.
Special Dividends are not guaranteed.
But because Ah Beng sold, I bet he's going to try to still pay the 5 sen Dividend to avoid SEC scrutiny for insider trading. So, I think, notwitstanding its low earnings, I think more than 50% odds, ZHULIAN will still try to pay the 5 sen Special Dividends, to avoid SEC scrutiny for insider trading. And they will spin that their business model is still fine, cash still positive, nil debts, etc.
But this time, the price rally will not sustain - it will more likely show a lower low. In next 12 months, unlikely to exceed 1.8, unless there is a positive earnings surprise from a new business model or something similar.
But in the scenario for dividend maintenance (best case, 17 sen for 2023), after payment of this final special dividend, if ZHULIAN is responsible, it should start to flag out expectations for lower future dividends. If it doesn't call out these future expectations, then, you are dealing with shareholders who are not transparent.
IMHO, this process of regular selling by Ah Beng in December is a strategic mistake. It is possible (but no one really knows) if he panicked knowing the business keeps getting worse after 8 years.
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Wow123
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Posted by Wow123 > 2022-05-20 19:36 | Report Abuse
my point of view their management team all are family & relatives how to improve on R&D. 2. Jewellery totally can't sell 3. Homecare products do not sell much only Ginseng coffee. onside factory in Plot 3 is almost empty and plot 42 on fake Jewellery, Water Filter, detergent & Toothpaste.