XMH Holdings Ltd - Aid By The Forex Gain


XMH Holdings Ltd (XMH) released their H1FY2016 results on 10th December 2015. We attended the company’s results briefing on 15th December 2015 and believe that the nearterm outlook remains “tough” for the company. These are the key takeaways from results briefing.

Analyst briefing key takeaways:

Undesirable operating environment
The unfavorable macro impacts such as declined marine activities and low oil price level, as well as increasing competition in property development sector, keep pressuring the company’s business, narrowing the margins and contract sizes. However, the management expects potential increases in demand of large engines in Indonesia and upward momentums in Vietnamese marine and fishing sector.

“Projects” Segment lifted the top line
“Projects” business segment increased by approximately S$9.5 mn yoy in 1HFY04/16, resulting from more completed projects deliveries. The Group view its order book remains healthy and management noted there are several new government-facilitated projects from Indonesia and Vietnam have secured recently, as well as those announced in Jun valued at total S$23.1 mn to be recognized over the next 2 years. Majority of its current order book will be expected to deliver in FY04/16.

Extra gain via strong USD
The net finance income was reported at S$1.3 mn in 1HFY04/16 compared to net finance expenses of S$0.4 mn during the same period last year. The substantial increase was mainly due to S$1.5m forex gain from receivables settled in USD whilst the costs were denominated in JPY. The contract sizes of this type are from S$10 mn to S$15 mn. Notwithstanding taking advantages of strengthened USD in the past, the company has done some hedges to control risks of Forex exposure.

Technical Analysis
Daily Chart
Negative free cash flows
During 1HFY04/16 period, XMH generated negative free cash flow of S$35.5 mn due mainly to the 2nd tranche payment of S$8.7 mn in acquisition of MPG, higher working capital requirement and S$23.9 mn capex of factory building construction in Tuas. As a result, net gearing increased from 13% to 78% as of end October quarter. (Read Report)

Source : Phillip Securities Research

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