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QuestionsCategory: Financials QuadrantBreadtalk – Profit attributable to Shareholder (Exc. Exceptional Items)
Qi Jie asked 3 years ago

Hi,
I would like to know why Profit attributable to Shareholder (Exc. Exceptional Items) is negative after my calculation.
I got the value of “profit attributed to share owners”, is 11.4mil in 2016 and 21.8mil in 2017. However after deducting the exceptional items, I am having a negative profit, this causes net profit margin to be negative. Am I doing something wrong?
For the exceptional items I remove Management Fee income, Income from mall operation and Rental Income, as I feel is recurring. Should I include gov grant as well? After deducting the exceptional items. the value is 16.5mil for 2017 and 16mil for 2016. This causes the profit in 2016 to be negative.
Hope to seek your advice, thank you.

Qi Jie replied 3 years ago

Also, I just check the Share Price (0.95) and I multiply it by the number of shares, around 282 million shares, the Market Cap is different from the one google is showing. The google is showing around 535 Mil, may I know am I missing out any items?

Thank you.

Qi Jie replied 3 years ago

Sorry, I figure out about my mistake, it is due to the share split.
In this case, I am doing the financials for 2017, how should I record it? Should I double the share price to compensate for the difference before the share split?

2 Answers
Victor Chng answered 3 years ago

Hi Qi Jie,
 
You are right to remove the exception item in Breadtalk (Do note that government grant is also exception item).
My rough calculation of exceptional item is as follows:
2017
Exceptional Items (EI): $33.2 – $13.5 (management fee) – $0.5 (Income from mall operation) = $19.2
Profit exclue EI: $20.2-$19.2= $1m
 
2016
Exceptional Items (EI): $29.5 – $11 (management fee) – $0.6 (Income from mall operation) = $17.9m
Profit exclude EI: $10.8-$17.9 = -$7.1m
 
Breadtalk is a special type of companies because they are growing the business, hence they have to constantly spend their money on capex which will cause depreciation amount in their profit and loss. On the P&L statement shows that Breadtalk is only making $1m profit excluding EI but if you look at the cash flow statement, their operating cash flow is actually making $77.6 million. Hence, it is better to look at breadtalk on a cash flow basis rather then a profit basis because their profit is always understated. 
If you want to understand more about Breadtalk depreciation you can look at the case studies video 1 which you can find it here. https://investmentquadrant.com/case-studies/
 
As for the share split, you do not need to double the price, I believe google price should be correct price. What you need to do is to double the share count.
 

Qi Jie replied 3 years ago

May I cfm the calculations, mine is slightly different with the inclusion of gov grant and rental income.

2017:
EI: 33.2 – 13.5 (Management fee) – 0.5 (Income from mall operation) – 1.7 (Gov Grant) – 2.7 (Rental Income) = 14.8m
Profit exclude EI: 21.8 – 14.8 = 7m

2016:
EI: 29.5 – 11 (Management fee) – 0.6 (Income from mall operation) – 2.5 (Gov Grant) – 1.9 (rental income) = 13.5m
Profit exclude EI: 11.4 – 13.5 = -2.1m

Are you also using the value from “Total comprehensive income attributable to owners of company” Instead of “Profit attributable to Owners of the Company” Since you use $20.2m for 2017 and $10.8m for 2016.
May I know the rationale?

Also for the share price in the excel, is there a method for it or which period of share price should I use? I am currently using the FY highest price and lowest price, and average both values.

Appreciate the case studies on Breadtalk, I watched the whole vid and trying to practise on the analysing of this company.

Qi Jie replied 3 years ago

For CAGR, what component should I use? or what are the general components? E.g. is it the revue, profit or share price etc.

I am not too sure where I should apply CAGR.

Thank you.

Victor Chng answered 3 years ago

Hi Qi Jie,
 
1.So sorry, Just realised I took the wrong figure. Yes you are right so take the profit attributed to owners of the company. As for the exceptional item portion, rental income can be remove from the exceptional item. As for governement grant, I think it is an exceptional item.
2.For the price, the method you just suggested is valid.
 
3.I think CAGR is usually calculated so that you can use it for the Discounted cash flow model but for Breadtalk, it is better to value them at Price to Cash flow

Qi Jie replied 3 years ago

Ok noted on the points, thanks alot!

Victor Chng replied 3 years ago

Welcome :)