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Haw Par Corp sealed the fate of Underwater World Singapore

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Many Singaporeans may recognize “Tiger Balm” as the world leading brand for topical analgesics. Some may even know that the Haw Par Corp, a company listed in SGX, is the owner of this renowned healthcare brand. However, not many people know that Underwater World Singapore (UWS) was owned by Haw Par Corp.

When Haw Par Corp sealed the fate of Underwater World Singapore (UWS) on 26 June 2016, many Singaporeans were taken by surprise. Being a forgotten icon of Singapore tourist attraction, many of us have overlooked the fact that UWS has being around for 25 years already. Within this period of time, the landscape has changed and not surprising, there are stiff competition from new and existing attractions.

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UWS holds special memories for me because this is one of the local attractions that my wife and I visited when we were dating. That was more than 7 years ago. The week before UWS closed shop, my family visited UWS for the very last time. We were surprised that the place remained largely the same and there were not many notable upgrades for the facilities. In fact, the new S.E.A Aquarium of Resort World Sentosa would appear to be more refreshing to tourists than the UWS.

Nonetheless, in the corporate world, sentiments count for nothing. For Haw Par Corp, UWS is just one of the two aquariums that it owned under its Leisure segment. The other aquarium is in Thailand, Pattaya. The number of visitors for both aquariums had declined by 16% since last year due to weaker tourist sentiments and stiff competitions from other attractions. As a result, revenue dropped to $12.7 million compared to $15.6 million in the previous year. Underwater World Singapore even incurred impairment charge of $4.6 million on its fixed assets due to “challenging operating environment”.

Hence, it can be seen that at the rate it is going, UWS is not financially sustainable for the Haw Par group, even though for FY2015, it remained cash-flow positive. For the latest first quarter financial report, the Leisure segment recorded a small profit of $480,000, a reverse from a loss of $143,000 in the previous year. These are small change for Haw Par Corp as most of its profits are derived from the Healthcare, Property and Investment segments.

As expected, Healthcare remains the best performing segment for Haw Par Corp because of its strong brand in Tiger Balm. The Group revenue increased 14.9% from $45.6 million to $52.3 million, mainly from Healthcare. Revenue from Healthcare increased 17.8% compared to previous year due to continued growth in sales from key markets. Profits for Healthcare rose by 12% to $15.2 million compared to previous year.

The company’s strategy in growing the Tiger Balm brand is through developing more product offerings and reaching out to more customers through digital media and sports sponsorship. This strategy of focusing on Healthcare proves to be the winning formula for Haw Par Corp as for the past 5 years, annual profits from this segment has grown from $16.1 million to $33.8 million. On the other hand, for the same period, the Leisure segment registered a massive decline in profits from $12.5 million to $2.5 million. Therefore the move to close UWS should be viewed positive by investors as the sale of assets would allow the company to invest the resources in better growth areas.

For the latest financial quarter, Haw Par Corp’s balance sheet remains extremely strong. Current assets amount to $747.7 million and total liabilities are only $152.4 million. The Group is very cash-rich and has more than $338 million in the bank. Cash generated from operating activities for the quarter is $11.5 million. The Net Current Asset Value Per Share (NCAVPS) is $2.71 per share, while Net Asset Value for the Group is $11.17.

For the past few months, Haw Par Corp shares had surged in price from a low of $7.36 to almost $9.00 in recent days. In my point of view, the current valuation is inflated and the surge in price is probably fuelled by the recent good financial results. The potential for upside swing is limited as the price is reaching the 10 year peak. Would not enter this counter for the near term but is monitoring the situation.

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Add a Comment
  1. The move makes strategic sense in my book.
    Did they try to sell it to Straco?
    Maybe Straco with their know how could have re-lauched it successfully, as the did with the “Singapore Flyer”.
    Whilst Tiger Balm is a magic brand,as I understand that the bulk of Haw Par`s NAV was their investments in UOB,UOL et al.
    Despite the huge discount to NAV, Haw Par could be a Value Trap
    if the owners (Wee) have no interest to reduce the discount to NAV.A major long term investor from Canada, got tired of waiting! PGL

  2. Hi Peter,

    Very interesting. I didn’t know Straco is actually a tourism asset operator until you mentioned it.
    Agreed with you on the point that Haw Par could be a value trap. In fact, I had written an article on it last year. Investors should tread carefully on this counter.


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