Haw Par Corp an ultra value stock?
Banking is traditionally a volatile segment and holding large amount of UOB shares may make Haw Par Corp more prone to market uncertainties, given that UOB is currently one of the most expensive stocks in SGX. One major market correction would easily wipe out a huge chunk of Haw Par Corp’s portfolio value. Furthermore, the banking business is not aligned to Haw Par Corp’s operation and so, I don’t understand how UOB can fit into Haw Par Corp’s investment framework. This is an aspect which I feel the management of Haw Par Corp needs to address. Otherwise investors would continue to lack understanding in this stock.
If investors don’t understand your business, they would not be interested in trading your company’s stocks. This explains the poor liquidity of Haw Par Corp. For far too long, the average daily trading volume amounts to less than 50,000 shares, in spite of above average company’s performance. Liquidity is an important factor to consider even for super long-term investors. Just imagine if the stock reaches the target price which you have set but you are unable to offload the shares because of the lack of takers in the market. You would have missed the boat when someone eventually buys from you, albeit at a lower price. Furthermore, poor liquidity can be a pain in the ass, if you need the money badly for other purposes.
Another no good factor about Haw Par Corp is that the management has made no plans to expand its core businesses – healthcare, leisure and property.The leisure segment would face stiff competition as the Underwater World Singapore begins to lose its novelty. This is especially so with the opening of Resort World Sentosa’s SEA aquarium. There is also limited room for growth engine in the property investment segment, given the current market sentiment. This means that Haw Paw Corp needs to bank on the healthcare segment and develop more products through in-house research and development. The company should also reach out to more consumers through bloggers and social media.
Financial Highlights
| Result (S$’000) | 2013 | 2012 |
|---|---|---|
| Group turnover | 141,176 | 139,349 |
| Profit from operations | 96,574 | 84,526 |
| Financial Position (S$’000) | ||
| Shareholder’s funds | 2,444,721 | 2,253,217 |
| Per Share* | ||
| Earnings (cents) | 49.4 | 55.1 |
| Net tangible assets ($) | 11.13 | 10.28 |
| Shareholder’s Value | ||
| Return on equity (%) | 4.4 | 5.3 |
| Dividend net* (cents) | 20.0 | 18.0 |
My conclusion is that I would invest in this counter only after SGX changed the board lot trading from the existing 1,000 shares to 100 shares in January 2015. This is because while I like this stock for its hidden assets and stable businesses, I want to limit my risk exposure as well. The poor liquidity, lack of expansion plans and questionable business focus are concerns that one needs to factor in before investing in this stock.
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Magically yours,
SG Wealth Builder
