2024 Annual Report Analysis for Lion Asiapac Limited: A Financial Turnaround with Strategic Investments

Business Description:

Lion Asiapac Limited operates in three primary business segments:

1. Roofing Solutions: Contributed S$14.0 million, accounting for approximately 34% of total revenue.
2. Lime Sales: Contributed S$15.5 million, representing the largest revenue segment at around 38%.
3. Steel Consumables and Mining Equipment Trading: Generated S$11.7 million, about 28% of revenue.

Industry Context:

Lion Asiapac Limited operates in industrial segments, with its main competitors being regional providers of roofing solutions, lime production, and steel consumables. The company has shown a resilient performance with a strategic acquisition in the roofing industry, which has helped generate recurring revenue and diversify the revenue base.

Business Model:

The company’s revenue streams are divided into roofing solutions, lime sales, and trading of steel consumables. It targets both regional markets and industrial customers, with a diverse supply chain and customer base. The recent acquisition of a roofing solutions business demonstrates their commitment to increasing stable revenue sources, while the lime business continues to provide a steady foundation. The competitive advantage stems from its ability to operate across multiple industrial segments while maintaining a strong balance sheet.

Financial Statement Analysis:

1. Income Statement:

   • Revenue: The company reported a revenue of S$41.2 million, up 36% from the previous year.
   • Gross Profit Margin: Increased significantly to 16.3%, compared to 4.7% in the previous year.
   • Profit After Tax: The company posted a profit of S$1.5 million compared to a loss of S$3.0 million last year, signaling a strong financial turnaround.
   • EBITDA: Positive at S$3.0 million, further confirming operational improvement.

2. Balance Sheet:

   • Current Assets: Increased to S$67.7 million from S$60.5 million, reflecting stronger liquidity.
   • Net Assets: Improved to S$60.4 million from S$58.3 million.
   • Current Liabilities: More than doubled to S$12.7 million, primarily due to an increase in operational activity.

3. Cash Flow Statement:

   • Cash and Bank Balances: Declined slightly from S$48.0 million to S$42.3 million, indicating strategic cash usage, possibly related to acquisitions.

Key Investor Considerations:

1. Revenue Growth: The 36% increase in revenue is driven by both organic growth in lime sales and the newly acquired roofing solutions business. This is a positive signal for future growth potential.

2. Profitability: The company turned from a loss of S$3.0 million last year to a profit of S$1.5 million, reflecting improved operational efficiency and better market conditions.

3. Balance Sheet: Despite the increase in liabilities, the company’s working capital remains strong, supported by a solid base of current assets. This indicates good financial health and the ability to meet short-term obligations.

4. Dividend: The company has decided not to recommend a dividend for FY 2024, choosing to conserve cash for future operations and business expansion. This could be viewed negatively by income-focused investors, but it reflects a focus on long-term growth.

Risks:

• Rising Liabilities: A sharp increase in current liabilities could be a risk if not managed carefully. Monitoring debt levels and repayment schedules will be crucial in the coming years.
• Legal Proceedings: The company is involved in arbitration related to the disposal of Compact Energy Sdn Bhd, which could result in uncertain financial impacts depending on the arbitration outcome.

Special Actions:

Lion Asiapac is actively diversifying its portfolio with strategic acquisitions, such as the roofing solutions business. This indicates a forward-looking approach to improving profitability and expanding its market footprint.

Recommendations:

• For Current Investors: Hold. The company’s turnaround in profitability, strategic acquisitions, and improved operational performance suggest potential for future growth. However, investors should keep an eye on rising liabilities and the outcome of the arbitration proceedings.

• For New Investors: Buy with caution. While the company has shown strong improvements, the lack of dividend and increasing liabilities could pose risks. Investors should consider entering the stock based on the company’s ability to maintain its positive trajectory.

Disclaimer:

The recommendations provided are based on the financial statements and reported figures for FY 2024. Investment decisions should be made after consulting a financial advisor, as this analysis is for informational purposes and does not consider individual financial situations.

Report Date: Financial Year Ending 30 June 2024.