Hap Seng: Bluechip, property, listed entity

This is the first time I am writing about Hap Seng Consolidated Bhd even though I have reviewed this stock before a few years ago. I do not own any units of Hap Seng today and has never bought any units before. I love companies which has shown good growth story and UNKNOWN to many. Seriously, whenever people talk about bluechips, it must always be a stock which everyone in the whole Malaysia including the uncles and aunties also know. Majority may win but majority are not always right. That’s why there are very few millionaires and there are even fewer billionaires.

Hap Seng was reported by Bloomberg as Southeast Asia’s best-performing stock. It has returned almost 400 percent to investors in three years. Hap Seng is a property, plantation and building-materials conglomerate. Despite the falling palm oil prices and a slow property market in transactions, its after-tax profit over the last four years has doubled! Think very carefully. This a result under bad times. Oh yeah, performance today is not a barometer for continuous success. Thus, please still only buy once you have personally evaluated and felt that you may not lose your money by investing in them.

hapsendsdkManaging Director Edward Lee said in an interview in his office in Kuala Lumpur.“The biggest opportunity right now is to acquire good assets, whether it’s plantations or property, If you grow your business organically it will take some time, whereas when there’s good companies we can acquire, the gestation period will be a lot shorter.” It has RM600 million in cash today. A number which majority of all developers could only dream about. Last year’s operating profit includes about half from its property business, 17 percent from palm oil and around the same proportion from credit financing. Hap Seng also owns quarries, has building supplies and fertilizer companies, a trading division and runs seven Mercedes-Benz dealerships. All of its plantations are in Sabah, on the northern tip of Borneo, as is much of its property holdings.

Due to the share price having quadrupled from 2012, Hap Seng’s price-to-earnings ratio is now at 17.9 percent. For everyone’s information, if this company is no longer growing aggressively, 18 percent price-to-earnings ratio is considered fully valued for me personally. If it’s growing, then to maintain the same price-to-earnings ratio, its share price would grow in tandem. Do you believe they can sustain their momentum even during current situation? Let’s just say I may buy 3,000 units just to get dividends or for a potential short break within Malaysia. Happy investing.

written on 8 June 2016

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