We Believe Nam Cheong's (SGX:1MZ) Earnings Are A Poor Guide For Its Profitability

Simply Wall St.

04-15

Even though Nam Cheong Limited (SGX:1MZ) posted strong earnings recently, the stock hasn't reacted in a large way. We decided to have a deeper look, and we believe that investors might be worried ...

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We decided to have a deeper look, and we believe that investors might be worried ...</p>\n\n<a href=\"https://finance.yahoo.com/news/believe-nam-cheongs-sgx-1mz-230430695.html\">網頁鏈接</a>\n\n</div>\n","source":"yahoofinance_sg","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>We Believe Nam Cheong's (SGX:1MZ) Earnings Are A Poor Guide For Its Profitability</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 12.5px; color: #7E829C; margin: 0;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nWe Believe Nam Cheong's (SGX:1MZ) Earnings Are A Poor Guide For Its Profitability\n</h2>\n<h4 class=\"meta\">\n<p class=\"head\">\n<strong class=\"h-name small\">Simply Wall St.</strong><span class=\"h-time small\">2025-04-15 07:04</span>\n</p>\n</h4>\n</header>\n<article>\n<div>\n<p>Even though Nam Cheong Limited (SGX:1MZ) posted strong earnings recently, the stock hasn't reacted in a large way. We decided to have a deeper look, and we believe that investors might be worried ...</p>\n\n<a href=\"https://finance.yahoo.com/news/believe-nam-cheongs-sgx-1mz-230430695.html\">網頁鏈接</a>\n\n</div>\n\n<div class=\"bt-text\">\n\n\n<p> 來源：<a href=\"https://finance.yahoo.com/news/believe-nam-cheongs-sgx-1mz-230430695.html\">Simply Wall St.</a></p>\n<p>為提升您的閱讀體驗，我們對本頁面進行了排版優化</p>\n\n\n</div>\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"1MZ.SI","symbol_name":"南昌","start_time":0,"source_url":"https://finance.yahoo.com/news/believe-nam-cheongs-sgx-1mz-230430695.html","article_id":"2527127576","we_media_id":null,"thumbnails":[],"rights":{"source":"yahoofinance_sg","url":"https://finance.yahoo.com/news/believe-nam-cheongs-sgx-1mz-230430695.html","rn_cache_url":null,"customStyle":"","selectors":"article, body","filters":"","directOrigin":true},"url":"https://stock-news.laohu8.com/highlight/detail?id=2527127576","pubTimestamp":1744671870,"columns":[],"sourceInfo":{"source_id":"yahoofinance_sg","name":"Yahoo Finance"},"weMediaInfo":null,"summary":"Even though Nam Cheong Limited  posted strong earnings recently, the stock hasn't reacted in a large way. We decided to have a deeper look, and we believe that investors might be worried about several concerning factors that we found.AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.SGX:1MZ Earnings and Revenue History April 14th 2025. That means a negative accrual ratio is a good thing, because it shows that the company is bringing in more free cash flow than its profit would suggest. While having an accrual ratio above zero is of little concern, we do think it's worth noting when a company has a relatively high accrual ratio. To quote a 2014 paper by Lewellen and Resutek, \"firms with higher accruals tend to be less profitable in the future\".","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":["earning"],"viewcount":null,"language":"en","relate_stocks":{"1MZ.SI":"南昌"},"translate_title":"我们认为南昌银行（SGX：1MZ）的盈利并不能很好地指导其盈利能力","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"1MZ.SI":0.9},"content_text":"Even though Nam Cheong Limited (SGX:1MZ) posted strong earnings recently, the stock hasn't reacted in a large way. We decided to have a deeper look, and we believe that investors might be worried about several concerning factors that we found. \nAI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.\n\n\n\n  SGX:1MZ Earnings and Revenue History April 14th 2025\n \n\n A Closer Look At Nam Cheong's Earnings \n Many investors haven't heard of the accrual ratio from cashflow, but it is actually a useful measure of how well a company's profit is backed up by free cash flow (FCF) during a given period. In plain english, this ratio subtracts FCF from net profit, and divides that number by the company's average operating assets over that period. This ratio tells us how much of a company's profit is not backed by free cashflow. \n That means a negative accrual ratio is a good thing, because it shows that the company is bringing in more free cash flow than its profit would suggest. While having an accrual ratio above zero is of little concern, we do think it's worth noting when a company has a relatively high accrual ratio. To quote a 2014 paper by Lewellen and Resutek, \"firms with higher accruals tend to be less profitable in the future\". \n For the year to December 2024, Nam Cheong had an accrual ratio of 1.00. Ergo, its free cash flow is significantly weaker than its profit. Statistically speaking, that's a real negative for future earnings. To wit, it produced free cash flow of RM93m during the period, falling well short of its reported profit of RM785.2m. Notably, Nam Cheong had negative free cash flow last year, so the RM93m it produced this year was a welcome improvement. However, that's not all there is to consider. We can see that unusual items have impacted its statutory profit, and therefore the accrual ratio. \n Check out our latest analysis for Nam Cheong \n Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Nam Cheong. \n The Impact Of Unusual Items On Profit \n Given the accrual ratio, it's not overly surprising that Nam Cheong's profit was boosted by unusual items worth RM441m in the last twelve months. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. We can see that Nam Cheong's positive unusual items were quite significant relative to its profit in the year to December 2024. All else being equal, this would likely have the effect of making the statutory profit a poor guide to underlying earnings power. \nOur Take On Nam Cheong's Profit Performance\n Nam Cheong had a weak accrual ratio, but its profit did receive a boost from unusual items. For all the reasons mentioned above, we think that, at a glance, Nam Cheong's statutory profits could be considered to be low quality, because they are likely to give investors an overly positive impression of the company. If you'd like to know more about Nam Cheong as a business, it's important to be aware of any risks it's facing. For instance, we've identified 3 warning signs for Nam Cheong (1 is significant) you should be familiar with. \n In this article we've looked at a number of factors that can impair the utility of profit numbers, and we've come away cautious. But there are plenty of other ways to inform your opinion of a company. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. So you may wish to see this free  collection of companies boasting high return on equity, or  this list of stocks with high insider ownership. \nHave 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.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"-1","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1,"code":"91000000","status":"200"}}}