Emerging Towns & Cities Singapore Ltd: Net Profit Decline and Key Financial Analysis
Business Description
Emerging Towns & Cities Singapore Ltd. (ETC Singapore) is incorporated in Singapore and listed on the Catalist board of the Singapore Exchange Securities Trading Limited. The company operates primarily in three business segments:
Discontinued Operations: This segment involves property development for sale and investment in properties to generate rental income in Myanmar.
Live Streaming E-Commerce: This segment includes live streaming e-commerce and the online and offline sale of consumer products in the People’s Republic of China (PRC).
Corporate: This comprises the corporate office in Singapore, which incurs general corporate expenses and manages dormant or inactive entities within the Group.
Industry Position and Market Share
ETC Singapore has diversified its business operations with a significant focus on the live streaming e-commerce sector in the PRC, a market experiencing substantial growth. The company’s earlier operations in property development in Myanmar have been classified as discontinued due to the proposed sale of DAS Group. The competitive landscape includes other e-commerce platforms in the PRC, and the company aims to leverage its new business segment to capture market share.
Revenue Streams and Customer Base
The company’s revenue streams are primarily derived from:
Live streaming e-commerce business in the PRC.
Sale of development properties and rental income from investment properties in Myanmar (discontinued operations).
Financial Statement Analysis
Income Statement
Revenue: For the nine months ended 30 September 2024, ETC Singapore reported revenue of S$4.9 million from its live streaming e-commerce business.
Net Loss: The company posted a significant net loss of S$33.9 million for the period, driven by losses from discontinued operations and increased administrative and selling expenses.
Gross Profit: The gross profit for the continuing operations was S$2.7 million.
Balance Sheet
Total Assets: Total assets decreased to S$144.1 million as of 30 September 2024, from S$177.1 million as of 31 December 2023.
Net Assets: Net assets stood at S$764,000, significantly lower than S$34.3 million at the end of the previous year.
Liabilities: Total liabilities were S$143.4 million, with a notable portion due to the classification of assets and liabilities as held-for-sale related to the discontinued operations.
Cash Flow Statement
Operating Activities: The company generated S$9.9 million in net cash from operating activities, largely due to changes in working capital.
Investing Activities: Net cash used in investing activities amounted to S$414,000, primarily for the purchase of property, plant, and equipment.
Financing Activities: Net cash used in financing activities was S$6.4 million, attributed to interest payments, bank loan repayments, and land lease premiums.
Dividend and Earnings
Dividend: No dividend has been declared or recommended for the financial period ended 30 September 2024.
Earnings: The company reported a significant net loss, with earnings impacted by high administrative expenses and losses from discontinued operations.
Key Findings and Recommendations
Strengths
New Business Venture: The live streaming e-commerce business in the PRC shows promising initial gross profits.
Strategic Shift: The proposed sale of DAS Group and focus on e-commerce could position the company for future growth in a booming market.
Risks
Net Loss: The substantial net loss and negative net asset position raise concerns about financial stability.
High Liabilities: The company’s high liabilities, especially those classified as held-for-sale, could impact future financing and operational capabilities.
Market Conditions: The economic environment in China, including deflation risks and price wars, could impact the new business segment’s profitability.
Special Actions
The company is focusing on diversifying into the live streaming e-commerce market and plans to seek shareholder approval for the disposal of DAS Group and business diversification.
Investor Recommendations
For Current Shareholders
Hold: Given the company’s strategic shift and initial success in the new business segment, current shareholders might consider holding their shares to evaluate the outcome of these strategic changes.
For Potential Investors
Wait and Watch: Potential investors should wait until the company stabilizes its financial position and demonstrates consistent performance in the new business segment before committing to an investment.
Disclaimer
This analysis is based on the financial statements provided and current market conditions. Investors should perform their own due diligence or consult with a financial advisor before making investment decisions.
Report Date: 13 November 2024 Financial Year Reporting: Nine months ended 30 September 2024
This report provides a comprehensive analysis of Emerging Towns & Cities Singapore Ltd, highlighting critical financial metrics and strategic initiatives for informed investment decisions.
