Thakral's (SGX:AWI) Decelerating Rates of Return: A Closer Look

Thakral Corporation Ltd (SGX:AWI) has been making headlines recently, but not for the reasons investors would typically cheer. The company's decelerating rates of return have raised eyebrows and sparked concerns among investors. Let's dive into the factors contributing to this trend and explore what it means for the future of Thakral's stock.



Interest Rates and Borrowing Costs
Interest rates play a significant role in Thakral's financial performance, as the company relies heavily on debt to finance its operations. Rising interest rates increase borrowing costs, making it more expensive for Thakral to refinance debt and expand its portfolio. This, in turn, can negatively impact the company's profitability and return on equity (ROE). In 2023, Thakral's EPS decreased to S$0.064 from S$0.14 in 2022, which could be attributed to the rising interest rates during that period.

Dividend Payouts and Yield
Thakral's dividend payouts and yield have also been affected by the company's decelerating rates of return. In 2023, the company declared a final tax-exempt (one-tier) dividend of S$0.02 per share, which was lower than the previous year's dividend of S$0.04 per share. This decrease in dividends can be attributed to the company's reduced profitability due to higher interest rates. Additionally, Thakral's dividend yield, which is the annual dividend payment as a percentage of the stock price, has decreased from 10.00% in 2022 to 6.11% in 2023. This decrease in yield can be attributed to the company's reduced profitability and the impact of rising interest rates on its financial performance.



Operational and Strategic Decisions
Thakral's operational and strategic decisions have also played a role in its decelerating rates of return. In 2023, the company acquired a majority stake in a logistics company, which expanded its portfolio and increased its exposure to the growing e-commerce market. However, this acquisition may have come at a cost, as Thakral's profit margins decreased from 11.1% in 2022 to 4.88% in 2023. Additionally, the company's share price has been declining over the years, indicating that investors may be concerned about the company's financial health and future prospects.

Conclusion
Thakral's decelerating rates of return can be attributed to a combination of factors, including rising interest rates, reduced profitability, and operational and strategic decisions. As the company continues to navigate these challenges, investors should closely monitor its financial performance and dividend payouts. While the recent rate cut by the Federal Reserve may provide some relief, Thakral will need to address its underlying issues to regain investor confidence and improve its return on equity. As always, it's essential to conduct thorough research and consider seeking professional advice before making any investment decisions.