Portfolio Q3 results

===Earning Season and World's Insight===

This quarter earnings seasons do not have much impact on most of the stock prices even when decent earnings are reported in fact most if not all went down even with remarkable results. The reason is obvious as the subprime woes got back into the scene making the worlds' economy gloom. With Expert Fund Houses like Merril Lynch, Goldman Sac, Citigroup & UBS credit woes falling beyond analyst expectations, the entire world is shaken. Thought that's the worse, you are totally wrong, the rising oil prices and the weakening dollar has added more stress to the world.

====Back in Singapore===

No doubt Singapore has enjoyed a robust growth in the economy but with all the dark clouds over US, the earnings on some companies looks ugly. A significant element that lower profits of serveral companies to the extend of making losses is the FX losses. The has affected the results of several companies such as Labory Marine, SembCorp Industries, Aztech ...etc results, which affect the growth of my counters.

===Aztech Financial Highlights===

Comparing 07 Quarter 3 to 06 Quarter 3

Revenue has increased from 8.9% from 61954 to 67495. With an increase in Revenue, COGS will naturally rise. However, the Group's COGS went up higher than its revenue with an increase of 12.1% from 49106 to 55050. This will definately bring the profit margin down and indeed the group reported a decline of 3.1 percent in the Gross Profit. It is alarming for investors and the management do need to look into the situation immediately to salvage the future growth.

Looking deeper, the group reported a significant increase in operating expenses. Other Operating Income has surge tremendously, increasing a 37.7% from 446 to 614. The figure is a very small in the overall picture and I find that this segment is relativly unimportant as it is not their core business. Selling and Distribution Cost has increase slightly, 2.1% from 2050 to 2093, which I feel is a reasonable figure. Next, the main attribute that erodes the earnings is the Administrative Expense(No idea what segment should be included here) where we saw an increase of 24% from 5232 to 6488. Finance Cost has gone down a bit, 10.7% , from 634 to 566.

From its further segmentation, I believe that the Administrative Expense consist of it's Provision of Doubtful Debts which amount to 579(previous year don't have), the Exchange Losses which surges 143% from 310 to 754, and the increase in Amortisation of Deferred Expenditure of 65.3% from 648 to 1071.

Other details are:
Decrease in Interest Income(2.4%) from 170 to 166
Decrease in Interest Expense(16%) from 531 to 446
Increase in Depreciation of property, plant and equipment(20.8%) from 1062 to 1284
Decrease in Loss on disposal of plant and equipment(22.2%) from 9 to 7

Altogether, the Quater Net Profit has decline 28.6% from 5030 to 3591.

The Group has provide explanations for the decline in profit.

• A slowdown in orders from a key Contract Manufacturing customer in Asia Pacific region
• The appreciation of Renminbi as well as rising labor costs and overheads in China, contributing to higher operating costs
• An additional exchange loss of S$0.44 million due to depreciation of US dollar against the Singapore dollar
• Rising commodity costs affecting gross margin
• Provision for doubtful debts of S$0.58 million from 2 customers

From the above factor, I am very concern on the 2nd, 3rd, and 4th point. This factors are systematic risk which the company are unable to control and will keep acting against the company diminishing their future growth. .

Finally pertaining to the 1st and last point,I hope that the Management will need to ways to improve their sales and access their customers carefully to save themselves from giving their customer free stuffs(Provision of Doubtful Debts)

P.S. Tough Adventure on Financial Analysis