GS Holdings Limited: Financial Report Analysis – Net Profit Decline of 89.9%

Report Summary

Date of Report: 12 November 2024

Financial Year Reporting: For the financial period ended 30 September 2024

Business Description

GS Holdings Limited (UEN: 201427862D) is an investment holding company based in Singapore. The company’s primary business operations are:

• Operation of food and beverage (F&B) outlets
• Provision of branding, operations, and procurement (BOP) services (currently inactive)

The company operates exclusively in Singapore with a total of eight F&B establishments under various brand names, including “Hao Kou Wei” and “Sing Swee Kee”.

Industry Position and Competitors

Within the F&B industry, GS Holdings faces competition from both local and international brands operating in Singapore. The company’s market share is not explicitly stated in the report, but its presence in the competitive Singaporean F&B market is notable.

Revenue Streams and Customer Base

The company generates revenue through the sale of food and beverages, rental income from food stalls, service income, and franchise fees. The majority of the revenue is derived from Singapore, with a minimal contribution from Brunei.
Revenue for the 9-month period ended 30 September 2024 was S\$7,480,000, a 9.1% increase compared to the same period in 2023.

Financial Statement Analysis

Income Statement

For the 9-month period ended 30 September 2024, the company reported a net loss after tax of S\$1,043,000, a significant improvement from the net loss of S\$10,362,000 in the same period in 2023. Revenue increased by 9.1%, but the gross profit margin declined due to higher fixed costs and staff expenses.
Administrative expenses increased slightly, and finance costs rose due to higher lease liabilities interest and a convertible loan.

Balance Sheet

As of 30 September 2024, the company had total assets of S\$3,875,000 and total liabilities of S\$6,856,000, resulting in a negative equity balance of S\$2,981,000. The company’s current liabilities exceeded its current assets by S\$3,467,000. The net asset value per share was -0.53 cents.

Cash Flow Statement

The company reported a net increase in cash and cash equivalents of S\$572,000 for the 9-month period ended 30 September 2024. This was primarily due to net cash generated from operating activities and proceeds from bank loans and the issuance of ordinary shares.

Key Findings

• Net loss after tax improved significantly from S\$10,362,000 to S\$1,043,000.
• Revenue increased by 9.1% to S\$7,480,000.
• Gross profit margin declined due to higher fixed costs and staff expenses.
• Negative equity balance of S\$2,981,000 as of 30 September 2024.
• Net asset value per share stood at -0.53 cents.
• Net increase in cash and cash equivalents of S\$572,000.

Special Activities and Actions

The company has taken the following actions to improve profitability:

• Completed a renounceable non-underwritten rights issue, raising net proceeds of S\$8,403,000 for general working capital and future expansion.
• Entered into a Sale and Purchase Agreement to acquire Octopus Distribution Networks Pte. Ltd. for S\$11.8 million to expand its customer base and operating scale in the beverage sector.

Dividend

No dividend has been declared or recommended for the financial period ended 30 September 2024.

Investment Recommendations

For Current Investors

If you are currently holding this stock, it is advisable to hold your position. The company is making strategic moves to improve profitability and has shown a significant reduction in net loss. The recent rights issue and proposed acquisition could provide growth opportunities.

For Potential Investors

If you are not currently holding this stock, it is recommended to monitor the company’s progress closely. The next 12 months will be critical as the company integrates its new acquisition and utilizes the proceeds from the rights issue for expansion. Consider investing if the company shows signs of sustained improvement in profitability and operational efficiency.

Disclaimer

The above recommendations are based on the financial report provided and do not constitute financial advice. Investors should conduct their own research and consider their financial situation and risk tolerance before making any investment decisions.