Auric Pacific

Kim Eng on 14 Sept 2012

Worth a bet. Auric Pacific may see more interesting times following ex-SMRT CEO Saw Phaik Hwa’s appointment as new CEO. We wonder if her key mandate is turning around the company for sale by the Riady family which owns 71% of the stock? After all, food is a negligible part of Lippo’s vast business interests and Auric Pacific is no longer the family’s flagship in Singapore. Despite the recent runup, we think it is still worth a bet at 0.77x NTA.

Quietly outperforming. Since our first report in May 2012, Auric’s share price has shot up by almost 50%, as the first quarterly results showed positive trends since the ex-CEO of SMRT came onboard. While it may too early to entirely attribute the results to her, 2Q12 net profit was a solid 378% ahead of the same quarter in 2011. Gross margin of 44% was also the highest since 2009, but to be fair, margins were already been improving for the last three quarters.

Saw’s retail magic worked wonders at SMRT. To recap, Auric hired ex-SMRT CEO Saw Phaik Hwa in May 2012. At SMRT, she had built a strong second wing for SMRT from rental and advertising until it made up half of group profits. While this excessive success with the non-transport side of the business may have contributed to SMRT’s ultimate woes that were pinned down on insufficient attention to the engineering side, there is no denying her success in retail and marketing.

She could be exactly who Auric needs. Auric’s main business is in the distribution of fast-moving consumable goods such as fine wines, as well as baked food products (Sunshine bread) and food retail outlets (Delifrance and Food Junction). Based on her experience in DFS (1998-2002) and SMRT (2002-2012), Miss Saw should prove to be a good fit for Auric. If so however, the stock’s outperformance since she came on onboard should have taken that into account.

Question is – will time be on her side? However, Ms Saw may find it more challenging to convince the Lippo Group, which owns 49% of Auric, to stay invested. Although Auric was the Riady family’s first listed vehicle in Singapore in 1997, its flagship is now Overseas Union Enterprise and most of the family money is now in property. Auric’s retail and F&B businesses accounted for only 4% of the earnings of its parent company, HK-listed Lippo, in 2011.