H02.SI - Haw Par Corporation

[WeiChiLoh]

What do you guys think? Is my thesis sound? Is it well written? Do forgive me if there are shaky parts or thoughts that are not articulated well enough, I am still in high school. I would appreciate some feedback.

 

THANKS!

Haw_Par.pdf

[thefatbaboon]

What do you guys think? Is my thesis sound? Is it well written? Do forgive me if there are shaky parts or thoughts that are not articulated well enough, I am still in high school. I would appreciate some feedback.

 

THANKS!

 

I've looked at this a number of times over the years.  It's hard to close these "arbitrages" - they often go on for years.  Probably one has to be comfortable holding it as a long. 

 

Let me put it like this: if I wanted to be long the bank I'd do it via Haw Par.  If I didn't want to be long the bank then I wouldn't buy Haw Par. 

 

 

 

 

[Hielko]

What do you guys think? Is my thesis sound? Is it well written? Do forgive me if there are shaky parts or thoughts that are not articulated well enough, I am still in high school. I would appreciate some feedback.

 

THANKS!

The big question I have after skimming your thesis is: who is the management of the company, and how shareholder friendly are they? What's track record w.r.t. capital allocation? Compensation? Related party transactions? In other words: is there a valid reason for a discount, or not?

[WeiChiLoh]

What do you guys think? Is my thesis sound? Is it well written? Do forgive me if there are shaky parts or thoughts that are not articulated well enough, I am still in high school. I would appreciate some feedback.

 

THANKS!

The big question I have after skimming your thesis is: who is the management of the company, and how shareholder friendly are they? What's track record w.r.t. capital allocation? Compensation? Related party transactions? In other words: is there a valid reason for a discount, or not?

 

Interesting. I will look into that but from my current knowledge, management is quite shareholder friendly with a good track record in capital allocation. They pay out a constant dividend annually of 22c per share and bought equity investment only when prices were depressed such as in the financial crisis on 2008. Compensation wise, it is minimal. Instead they own stock of Haw Par.

 

I am not too sure to what you mean by related party transactions though. Do you have an example?

 

Thanks for the reply!

[Guest chai]

There is a similar write-up on VIC a while ago:

http://valueinvestorsclub.com/idea/Haw_Par/101022#messages

 

As for the write-up, I think the biggest omission would be the shareholders / shareholding structure.

From my cursory review, the Wee family which controls Haw Par Corp also control the UOB, and possibly, the other listed companies that Haw Par Corp invests in (?)

In fact, UOB Group alone has a market cap of circa SGD 37bn? and, it seems that the Wee family controls close to, at least, 20% of it, so their stake on UOB alone is >7bn.

Wee is consistently ranked as one of the richest individual in Singapore by Forbes. So this really begs the questions, gievn someone of his wealth - what is the relevance of Haw Par to Wee in grand scheme of thing? Is there any urgency to unlock/ realise the value or HoldCo discount (says Haw Par stake is transferred to one of the sons/ next generation who derive bulk of his/ her wealth from Haw Par)

[WeiChiLoh]

There is a similar write-up on VIC a while ago:

http://valueinvestorsclub.com/idea/Haw_Par/101022#messages

 

As for the write-up, I think the biggest omission would be the shareholders / shareholding structure.

From my cursory review, the Wee family which controls Haw Par Corp also control the UOB, and possibly, the other listed companies that Haw Par Corp invests in (?)

In fact, UOB Group alone has a market cap of circa SGD 37bn? and, it seems that the Wee family controls close to, at least, 20% of it, so their stake on UOB alone is >7bn.

Wee is consistently ranked as one of the richest individual in Singapore by Forbes. So this really begs the questions, gievn someone of his wealth - what is the relevance of Haw Par to Wee in grand scheme of thing? Is there any urgency to unlock/ realise the value or HoldCo discount (says Haw Par stake is transferred to one of the sons/ next generation who derive bulk of his/ her wealth from Haw Par)

 

WOWW.  Never knew such a similar idea existed. Agreed. I think it all depends on management on closing the NAV gap, and it doesnt look too good from this perspective.

[WeiChiLoh]

One thing that is interesting that I did not add in my analysis is that on a closest comparable valuation, against Yunnan Baiyao Group Co Ltd or Tibet Cheezheng Tibetan Medicine Co Ltd, Tiger Balm is worth between $500m - $1 billion. 20 - 40x EBIT.

 

I know...aggressive..but understand the geographically concentration of Haw Par's product. I didn't use the closest comparable because..I wanted to be conservative. But it is interesting don't you think? 

 

By the way, I have an investment blog and it would be great if I could get some feedback on that too.

 

http://chemiccapital.blogspot.com/

[WeiChiLoh]

Also, a couple of things that I did not mention was that I was valuing Tiger Balm and UWW on a FY 2013 basis.

 

Over the last 9 months, Tiger Balm growth exceeded by 11% expectation, at 21%, and saw profit margin expansion.

 

In addition, the problems in the UWW segment does not seem to be escalating as it is still profit generative.