Is Now The Time To Put Second Chance Properties (SGX:528) On Your Watchlist?
Simply Wall St
4 min read
The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Second Chance Properties (SGX:528). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That makes EPS growth an attractive quality for any company. Shareholders will be happy to know that Second Chance Properties' EPS has grown 35% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Second Chance Properties shareholders can take confidence from the fact that EBIT margins are up from 36% to 40%, and revenue is growing. That's great to see, on both counts.
In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.
SGX:528 Earnings and Revenue History June 17th 2023
Second Chance Properties isn't a huge company, given its market capitalisation of S$204m. That makes it extra important to check on its balance sheet strength.
Are Second Chance Properties Insiders Aligned With All Shareholders?
Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
With strong conviction, Second Chance Properties insiders have stood united by refusing to sell shares over the last year. But the bigger deal is that the company insider, Radiah Binte Mohamed Salleh Maricar, paid S$219k to buy shares at an average price of S$0.22. Purchases like this clue us in to the to the faith management has in the business' future.
On top of the insider buying, we can also see that Second Chance Properties insiders own a large chunk of the company. To be exact, company insiders hold 85% of the company, so their decisions have a significant impact on their investments. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. In terms of absolute value, insiders have S$174m invested in the business, at the current share price. That's nothing to sneeze at!
While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. The cherry on top is that the CEO, Mohamed Salleh Marican is paid comparatively modestly to CEOs at similar sized companies. Our analysis has discovered that the median total compensation for the CEOs of companies like Second Chance Properties with market caps between S$134m and S$535m is about S$1.1m.
The Second Chance Properties CEO received S$931k in compensation for the year ending August 2022. That comes in below the average for similar sized companies and seems pretty reasonable. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.
Is Second Chance Properties Worth Keeping An Eye On?
You can't deny that Second Chance Properties has grown its earnings per share at a very impressive rate. That's attractive. Better still, insiders own a large chunk of the company and one has even been buying more shares. These things considered, this is one stock worth watching. We should say that we've discovered 2 warning signs for Second Chance Properties that you should be aware of before investing here.
Keen growth investors love to see insider buying. Thankfully, Second Chance Properties isn't the only one. You can see a a free list of them here.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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