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Tug-Of-Fools: Vibrant Group – The Bull Argument
Corporate Digest | 02 October 2014
Related stocks:
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My name is James Yeo of Motley Fool Singapore, this is my bull case for Vibrant Group.

Vibrant Group, with its small market capitalisation of $260 million and recent name change (it was known as Freight Links Express Holdings until November 2013), would likely not be a well-known name amongst investors.

But, I have three main points that lend credence as to why Vibrant might be a company that’s worth a deeper look.

A 3-Pronged Growth Approach

Vibrant started life in 1981 as a freight forwarder before gradually expanding its operations overseas with more services like logistics and warehousing. Starting from 2007, the company underwent further transformation – it had begun to deploy cash to make certain investments and to take part in strategic alliances, resulting in fast growing business segments involved with real estate and financial services. In fact, the name change to Vibrant Group was made partly to better reflect the switch in the company’s direction.

Some of Vibrant’s notable moves in the real estate space include being the sponsor of Sabana Shari’ah Compliant Real Estate Investment Trust (Sabana REIT); the company owns 6.8 percent of the REIT as well. Elsewhere in financial services, Vibrant has a US$30 million investment in the Sentosa Asian Credit Fund.

Late last year, Vibrant also amassed a one quarter stake in commercial and industrial facilities developer Figtree Holdings and both companies are jointly developing a high-tech industrial park in Changshu, China, and a resettlement housing project in Jiangyin, China.

The shift in business focus seems to have worked well for Vibrant. The company currently has three main business segments, namely freight and logistics, financial services, and real estate. For the financial year ended 30 April (FY14), the freight and logistics segment was far and away the most important sales driver for Vibrant with a 90.1 percent slice of the company’s total revenue pie.

But, the segment contributed to just 56.7 percent of the company’s total pre-tax profit, with financial services providing the other big chunk at 41.1 percent. It’s noteworthy that financial services have such a big slice of Vibrant’s pre-tax profit despite making up only 8.6 percent of total sales.

The real estate segment is still tiny – it made up only 1.3 percent and 2.2 percent of Vibrant’s total revenue and pre-tax profit, respectively, for FY14 – but there are promising developments there. For instance, Vibrant had just bought a 35 percent interest in Equity Plaza, a commercial space located in the heart of Singapore’s central business district. The company’s also redeveloping a six-storey chemical warehouse at Gul Circle which is expected to be completed in 2016.

An Engaged And Capable Management Team

The provision of freight forwarding and logistics services can be very competitive – price wars and business failures are common occurrences in the space. Thus, the ability of Vibrant’s management team to continually expand the segment’s operations – revenue had grown from $150 million in FY11 to $172.7 million in FY14 – is by no means an easy feat in itself.

Furthermore, Vibrant’s reach into the more lucrative real estate and financial services segments shows that management is not complacent.

Vibrant’s management team also has a big interest in seeing the company succeed – Eric Khua Kian Keong, executive director & chief executive of the company, has a huge 56.1 percent stake in the firm.

Commendable Financials

One of the bed-rocks for a share’s long-term success is the company being able to consistently grow revenue and profits. On that front, Vibrant has aced it – the company’s been steadily growing its revenue and profits over the past five years, with profits tripling from $13.9 million to $42.7 million.

Source: Company Website

While Vibrant’s growth may have come on the back of increased borrowings (as seen in the chart above, total debt has increased by almost four-fold from FY10), the company’s net debt ratio still stands at a fairly conservative 0.4 as of the end of FY14.

Vibrant Group has also pleased income investors with its steadily growing dividend. As of 30 September, the company sports a juicy historical dividend yield of 5.2 percent. That’s comparatively higher than the SPDR STI ETF’s yield of 2.7 percent. The SPDR STI ETF is a close proxy for Singapore’s share market barometer, the Straits Times Index.

Foolish Summary

All told, Vibrant is growing on three fronts; has a capable management team whose interests are aligned with shareholders; and it has a strong set of financials. These reasons make me think the company would be worth a deeper look by investors.

The Motley Fool (fool.sg) offers stock market and investing information, offering people suggestions on how to take control of their money and make better financial decisions.

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Sabana Shari'ah Compliant REIT  0.440 -0.005 -1.12%   
Business: Trust established principally to invest in income-producing real estate used for industrial purposes in Asia, as well as real estate-related assets, in line with Shari'ah invs principles.

Insight: Jan-19, FY18 gross revenue fell 5% to $81m due to ... Read More
Figtree Hldgs  -- -- --   
Business: Designs and builds commercial and industrial facilities.

Insight: Mar-19, FY18 revenue tanked 86.5% due to completio... Read More


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