Latest / Investor Exchange / Unveiling Figtree Holdings: The Story Behind the Numbers

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Unveiling Figtree Holdings: The Story Behind the Numbers · Investor Exchange

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Music.
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Full year results for 2024. And yeah, you've given me like a whole stack of documents here.
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We've got condensed financials, notes of the statements, all those disclosures
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they got to put out for their catalyst listing.
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But I'm kind of curious, like, what's the story? What's the story behind all these numbers?
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Well, the first thing that jumps out is this disclaimer of opinion,
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right, from the auditors. And it's not just for this year.
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They've had this disclaimer of opinion carry forward from the last couple of years.
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That's got to be a red flag, don't you think, for any investor looking at this?
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Yeah, definitely. I mean, I'm not an accountant, but when I see that,
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it's a bit like, okay, what's going on here?
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So for those of us who aren't fluent in accounting aids, what does a disclaimer
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of opinion actually mean? Why should that make an investor nervous?
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Well, imagine this. You're buying a used car and you take it to your mechanic
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right to get it checked out.
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And he comes back and says, you know, I can't really give you a full inspection.
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I can't open the hood. It seems to be stuck.
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So you can't really give a good opinion about the car because you don't have all the information.
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That's kind of what's happening here. The auditors are saying,
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hey, we can't really get a clear enough picture of their financials to give a good opinion.
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Could be some information's missing or they're concerned about the way Fig Tree
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is doing their accounting. So that makes it harder to trust the numbers.
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Makes sense. So let's dig into those numbers a little bit. Just on the surface,
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looking at revenue, pretty big jump, right?
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144.2% for the quarter, 34.8% for the whole year.
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It sounds pretty impressive now. It does sound impressive, but again,
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I've got to look a little deeper, right?
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If you look closely, you'll see a lot of this revenue growth is coming from
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really just a couple of things.
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One is the completion of that Esme development project. Yeah. That's in Australia.
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And then they've also got revenue coming in from the new Jirtay project.
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That's the China project.
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So it's really driven by these new projects, huh? Yeah. And also it's interesting,
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some of their older projects like
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OJJ, Pano, and Leptin, they actually contributed less revenue this year.
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So we're not just seeing growth. We're actually seeing a shift.
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Ah, interesting, like a shift in where the revenue is coming from. Right, exactly.
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And I mean, that makes you think maybe they're moving away from less profitable
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things or focusing on these bigger projects.
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But we've got to remember one thing, all this revenue increase,
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it's come with a pretty hefty increase in their cost of sales as well.
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Yeah, I was going to say, I was looking at that and thinking,
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if the revenue is going up.
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Shouldn't their profitability be improving? Why are the costs going up so much?
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It's a good question. It shows why you can't just look at the top line, right?
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So that increased cost of sales, it's tied right back to the revenue sources,
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especially the Esme project. Think of it this way.
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Bigger projects, they usually come with bigger price tags, more expensive to build, right?
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So, yeah, revenue's up, but so are their expenses.
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Right. So it's a little bit like, you know, you double a recipe,
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got to buy twice as many ingredients. You make more food, but your grocery bill goes up.
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Exactly. It's just business, right? More sales. Usually got to spend more to get those sales.
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But there's another thing hitting their bottom line that we need to talk about.
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This huge impairment loss. Right. I was going to bring that up. Two million dollars.
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And a lot of it's on a loan they gave to an associate, right?
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What I thought was strange is
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last year, remember, they had an impairment reversal for a similar amount.
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Kind of like a roller coaster up and down. What's the deal with that?
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Well, I think it shows just how tricky these impairment decisions can be.
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What looks recoverable one year might not be the next, especially with loans
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to, you know, related parties.
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Makes you think, huh, how good is their due diligence?
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How financially healthy are these associates they're lending to?
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Yeah, it raises some questions for sure. So that impairment loss, is that a red flag then?
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About their risk management, how good they are with money. I think it's definitely
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something to consider, especially with everything else we're seeing here.
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And speaking of red flags, we can't ignore the going concern warning.
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That's something investors should really take seriously.
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Yeah, that definitely got my attention too. So in plain English,
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what does a going concern warning mean for Fig Tree?
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Why are the auditors making such a big deal about it?
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Okay, so basically a going concern warning means the auditors have some serious doubts.
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Doubts about whether Fig Tree can keep operating, you know, stay in business in the near future.
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A lot of factors feeding into that. First off, they had a net loss for the year.
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Doesn't look good, right?
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Then you see they got a lot of borrowings, adds to their financial burden.
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And on top of that, their current liabilities, which are like debts they need
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to pay pretty quickly, those are actually bigger than the cash they have on hand.
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So the auditors are saying, hey, this is risky. There's a real chance they might
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not be able to keep the lights on. Wow. That sounds pretty dire.
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Is Fig Tree really on the verge of going belly up? Well, it's not quite that simple.
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You see, while the auditors are waving the red flag, the company's management,
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they're pushing back, trying to paint a more positive picture.
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They're saying, hey, look, we've got this net current assets position,
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which means we got more assets than liabilities in the short term.
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They're also talking about positive cash flows coming from their operations,
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and they're trying to raise more capital. Plus, they even got this loan from
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a shareholder after the year end.
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So it's not a clear-cut case of, we're closing up shop tomorrow.
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More like a tug-of-war, the auditors are skeptical, but management's trying
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to reassure everyone. Sounds like they're walking a tightrope, then. Yeah.
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They got some lifelines, but some pretty serious obstacles, too. Exactly.
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Which is why I think we need to take a closer look at those shareholder loans,
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especially the ones secured by a share charge.
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You know, it might be a temporary solution, but,
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It raises questions about how independent they really are, how stable things
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are for the long term. Yeah. Makes sense.
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Yeah. These shareholder loans, definitely something to keep an eye on.
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It's kind of like, imagine you're running a marathon, right? And you hit that wall.
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A friend gives you a little energy gel, helps you out in the moment,
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but doesn't change the fact you still got miles to go.
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That's what these loans are for Fig Tree. Quick cash, but they don't fix the
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bigger issues. Right. So more of a Band-Aid than a cure, huh?
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Exactly. And like any quick fix, there can be side effects.
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Here, those side effects are the interest payments.
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Fig Tree's got to pay that back with interest.
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Plus, some of these loans, they're secured by a share charge.
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So if Fig Tree can't pay up, the lender, while they get a claim on some of the
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company's shares, gives them more control, more leverage.
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Ah, so that adds a whole other layer of risk then.
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Yeah. Both for Fig Tree and for whoever's lending that money.
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What does that mean for their future, for attracting new investors,
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people who aren't already connected to the company?
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It definitely makes things more complicated.
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Investors, especially those who aren't related parties, they might think twice
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when they see this much reliance on shareholder loans could make them think,
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hmm, maybe they can't get funding the normal way.
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But let's shift gears a bit. Take a look at Fig Tree's outlook for the future.
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Okay, so looking ahead, given everything we've talked about,
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disclaimer of opinion, the shifting revenues, the impairment,
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going concern warning, and now these loans, what's Fig Tree saying about the
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future? Are they optimistic or are they being realistic about the challenges?
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Well, they are acknowledging that the global economy is tough,
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that might impact their new projects, and they're saying they've got to manage costs carefully.
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So they're not pretending everything's perfect.
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They've also made a tough call. No dividends this year. Yeah,
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I saw that. No dividends for investors, given how shaky things seem financially.
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Probably a smart move to hold on to that cash, right?
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Makes sense. Shows they're focused on survival, not on paying shareholders right now.
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Battening down the hatches, preparing for rough seas. But it's important to
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remember, we're only seeing one side of the story.
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We're looking at public information, but behind the scenes, who knows what kind
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of decisions they're making, what plans they're cooking up, how they're managing
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risk. We just don't see that.
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Yeah, true. So if you could like sit down with Fig Trees Management,
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what would you want to ask them?
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What questions would give you a better sense of their plan and whether they
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can really get over these hurdles? Well, first things first,
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got to ask them about those audit issues.
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What are they doing to give the auditors the info they need?
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Are they fixing those concerns or hoping it'll all just work itself out?
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Then I dive into those shareholder loans. What are the terms?
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How much interest are they paying? When do they have to pay it back?
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Are they looking at other ways to get funding so they're not so reliant on these
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loans? And what about managing those costs they mentioned and all those global challenges?
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How are they dealing with stuff like materials getting more expensive,
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supply chains being messed up, all that stuff that's hitting construction companies everywhere?
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Are they trying new technologies or working with other companies to manage those risks? Yeah, exactly.
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Just saying global challenges, that doesn't tell us much. I want specifics.
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What are they most worried about? What are they actually doing about it?
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And then there's their plan for growth. Right now, they're really depending
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on these big development projects. But what about other things?
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Are they thinking about going to new markets, offering different services,
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finding other ways to make money? Right.
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They got to show investors they have a plan B, a way to stay afloat if things get rough.
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But beyond the numbers, there's the people, the leadership.
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The company is only as good as the people running it, wouldn't you say?
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Definitely. I'd want to know, what's the track record of Fig Tree's management team?
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Do they have the experience to guide the company through these tough times?
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Do they have a vision? Are they tough enough?
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Do their employees believe in them, their suppliers, their customers?
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Because ultimately, it all comes down to trust, right?
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Investors got to trust that the people at the top are making good choices,
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managing risks, and that they're steering the company in the right direction for the long term.
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So even with this deep dive into Fig Tree's financials, we're left with a lot
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more questions than answers.
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It's like peeling back one layer of the onion. There's still a whole lot more underneath.
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Right. Now, I want to focus on something specific. Their revenue breakdown by geography.
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It's really interesting. It shows how their focus has shifted.
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Yeah, I noticed that, too.
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All their revenue in the fourth quarter of 2024, it all came from Australia.
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It's a big change from before. And for the whole year, most of the revenue came
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from China and Australia.
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Singapore is not such a big part of the picture anymore. Yeah,
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this move towards Australia and China makes you think.
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On one hand, it seems like they're doing a good job getting into new markets,
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making their revenue more diverse.
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But then it also makes you wonder, are they too dependent on these two places now? Exactly.
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What if those markets go sour? What if there's an economic downturn or some political upheaval?
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Can they handle that? Diversifying is good, but it can be risky too. You got it.
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Okay, let's look at the revenue breakdown a little differently now.
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Buy product or service line. This helps us understand where their strengths
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are and where they might be vulnerable. Good point.
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So the numbers show they're still making most of their money from selling completed
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development properties, especially those big commercial and industrial ones.
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Those big projects are bringing in the big bucks.
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Right. That's their bread and butter, as they say.
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But they're also making some money from project management and consultancy services.
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It's not a huge amount, but it shows they're trying not to put all their eggs
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in one basket. That's good to see.
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It means they're using their expertise for more than just building and selling properties.
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This diversification could really help them in the long run,
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especially with the market being so unpredictable.
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But before we get carried away talking about diversification,
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I want to go back to something you mentioned before, revenue recognition.
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Might sound a bit technical, but I think it's important to understand how Fig
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Tree actually makes its money.
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You're absolutely right. It's not just about when the money comes in,
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but when they can officially say, hey, this is revenue.
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And for FigTree, it's a bit of a mix.
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They recognize most of their revenue over time, which is normal for these big
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construction projects.
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So they're recording revenue as they go, not just when the project's done.
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So for those huge developments, they're basically getting paid in installments
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as they reach certain milestones.
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And they're reporting that revenue
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bit by bit. Exactly. It's called the percentage of completion method.
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It's pretty standard for construction companies. But here's the interesting part.
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Some of their revenue, they recognize it all at once. And guess what?
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That all comes from those completed development properties in Australia.
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Ah, I see. So for those Australian properties, they only record the revenue
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when the sale is totally finalized.
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Keys handed over, deal done. Exactly.
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Different way of doing things, and it can really affect their financial reports.
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Like, if a sale in Australia gets delayed, that revenue gets pushed to the next quarter.
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So suddenly, their performance in this quarter might look worse than it actually is.
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Got it. So understanding this revenue recognition thing is super important for
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making sense of their financials. It's not just about looking at the total revenue number. Absolutely.
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Got to look at the timing and the different methods they're using.
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Okay, now let's switch gears and look at their expenses.
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One thing I always find interesting is the breakdown of employee benefits expenses.
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Tells you how much they're investing in their people, which says a lot about their priorities.
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Yeah, people are a company's biggest asset, right? So what does fig tree spending tell us?
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Are they taking care of their employees or cutting corners? Well,
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employee benefits are a big chunk of their cost of sales and their general expenses.
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Salaries, bonuses, retirement plans, all that stuff that comes with attracting
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and keeping good employees.
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And remember, all that talk about cross pressures. Well, this is where it hits
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home. Labor costs are a major expense, especially in construction.
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Everyone's fighting for skilled workers. So they really got to manage those
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labor costs well if they want to make money, especially since competition is
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so tough and margins can be pretty thin. Absolutely.
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And let's not forget those finance costs we talked about. The interest they're
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paying on all those loans, including the ones from shareholders,
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that's eating into their profits, too. Right.
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Those loans might help them out in the short term, but they definitely come with a price tag.
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And that price tag shows up on their bottom line. It's a delicate balancing act.
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It is. They got to weigh the pros and cons.
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Quick cash now versus those interest payments down the road.
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And with that going concern warning hanging over them, those finance costs are
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just adding fuel to the fire, making the auditors even more worried about whether they can stay afloat.
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Okay, let's shift gears again. I always find related party transactions interesting.
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You know, those dealings between the company and people or entities that are
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closely connected to them, like executives, directors, major shareholders,
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those can sometimes be a red flag for investors.
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You're right. It's important to look at those transactions carefully and make
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sure they're fair, that they benefit all the shareholders, not just the insiders.
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So what kind of related party transactions are we seeing with FigTree?
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A few things. They're making some interest income from loans they've given to associates.
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They're also getting management fees from an associate, which makes you think
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they're pretty involved in each other's operations.
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And of course, there are those interest
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expenses they're paying on those shareholder loans we talked about.
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It's a bit of a tangled web, but at least it's all laid out in the notes to
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the financial statements. That's good, right?
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That they're disclosing all this information in the notes shows they're being
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transparent, which is always good for investors.
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Transparency is definitely key. Let's investors see what's going on with these
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related party transactions and how they might affect the company's overall financial health.
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Speaking of investors, we can't forget about those dividends,
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or I guess the lack of them.
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Bigtree decided not to pay any dividends this time around. They said they need
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to conserve cash. Yeah, not a surprise with that going concern warning.
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They need all the money they can get right now to keep things running and deal
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with these financial challenges.
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I get it from a business perspective, but it's got to be tough for investors
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who are hoping to see some return on their investment.
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It really shows the tough choices they're facing.
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Survival now or paying shareholders later? It's a tough spot to be in for sure.
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They need to convince investors that this is just a temporary setback,
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that things will get better in the long run. But for that to happen,
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they need a clear plan, they need to execute it well, and they need to be up
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front with investors about what they're doing. Absolutely.
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They got to show they're in control, they have a plan, and they're doing everything
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they can to get through this rough patch.
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But as we've seen, Fig Tree's story is far from over. That's right.
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This deep dive has given us a peek into their financial performance,
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the challenges they're facing, and their potential.
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But it's also left us with a lot of questions.
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Feels like we just scratched the surface, you know?
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And now we're left wondering what's really going on under the hood.
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Yeah, it's like the more you learn, the more you realize you don't know.
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But that's what makes analyzing companies like Fig Tree so interesting,
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right? It's like a puzzle.
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You're piecing together these financial clues, trying to figure out what's happening
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in the market, what decisions they're making, all to get a clearer picture of what's going on.
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But before we wrap up, I think it's important to zoom out a bit. Think bigger picture.
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Fig Tree's not operating in isolation, right? They're part of this whole global
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construction and property development industry, and that industry is facing
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some pretty strong headwinds right now.
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You're right. We can't ignore the macro environment.
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So what are some of those bigger trends, those challenges that are affecting
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companies like Fig Tree?
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Well, top of the list, got to be those supply chain disruptions and rising material costs.
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You know, the pandemic really messed things up. Those global supply chains got all tangled.
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And construction, they rely so much on materials, lumber, steel,
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concrete, and all that's gotten way more expensive.
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So those cost pressures we've been talking about, it's not just fig tree.
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It's a global problem. Exactly. And then you've got the labor shortages.
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Finding skilled workers, it's a nightmare for construction companies everywhere.
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Wages are going up. Everyone's fighting for the same people.
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And that's putting a squeeze on profits.
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Classic supply and demand, right? Huge demand for construction,
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but not enough skilled workers to meet it. And we can't forget about the environment either.
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People are demanding more sustainable buildings, energy efficient,
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eco-friendly, made with sustainable materials.
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Investors are paying attention to that, too. That's a big one.
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Construction's a big contributor to greenhouse gases. So companies like Fig Tree, they got to adapt.
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Sustainable building practices, reducing their carbon footprint,
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showing they care about the environment. It's not just the right thing to do.
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It's good business. So with all these challenges coming at them from all sides,
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How well prepared is Fig Tree to adapt? Can they thrive in this changing world?
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That's the big question, isn't it? Moving into Australia and China, that could help them.
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Gives them access to different markets, different opportunities,
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and trying to offer more services, not just property development. That's smart too.
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But they got to be strategic. They got to be able to move quickly and they got to be innovative.
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They got to stay ahead of the game, know what's coming next,
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and show they can deliver real value even as the world's changing so fast.
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Exactly. And they got to be good at communicating that to investors.
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Be transparent, be accountable, have those open conversations.
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That's how you build trust and confidence.
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So as we wrap up this deep dive into fig tree holdings, we're left with kind of a mixed bag, huh?
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Some potential, but some big challenges too. Yeah, they're at a crossroads,
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tough market out there and some internal stuff they got to sort out.
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But they also have opportunities to grow, to do new things. The next few months
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will be crucial for them.
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Their decisions, how well they execute those decisions, and how well they communicate
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with investors, that's all going to determine what happens next.
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And for you, our listener, hopefully this deep dive has given you some good
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insights and a way to think about analyzing companies in this sector,
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construction, and property development.
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Until next time, happy investing.
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Music.