My Personal Analysis of Haw Par Corporation Limited

In my past few months screening for dividend stocks using Stocks Café, Haw Par Corporation Limited has always appeared in the list, providing a dividend yield of 8.104%. I have always known Haw Par as a multinational company and I co-relate Haw Par with the iconic Tiger Balm brand. Is this a dividend yield stock or 8.104% dividend yield is too good to be true?

I decided to do further research to check this out.

Business Overview

The best place to find out what the business for Haw Par Corporation Limited is about is to check out the company’s website. Haw Par Corporation Limited is a Singapore grown multinational group that was listed on the Singapore Stock Exchange since 1969. They have businesses in Healthcare, Leisure, Property and Investments.

Based on Haw Par’s 2018 Annual Report, we can see that the bulk of its revenue comes from Healthcare and Investments. Leisure and Property forms a smaller pie of its revenue. Personally, I do not think Investments should be classified as one of Haw Par’s core business because it is basically buying shares of another company and earning through dividends and growth of another company which is in another industry. For me, I classified Healthcare (Tiger Balm) as the core business of Haw Par Corporation Limited.

Healthcare

In the healthcare segment, this is basically all about the Tiger Balm which should be Haw Par’s core business. Haw Par is the owner of the iconic Tiger Balm Brand. There is a long history about Tiger Balm which you can read from Haw Par’s website so I shall not drill into the details here. You can see below the huge range of Tiger Balm products that Haw Par offers today.

Leisure

I was surprise that Haw Par deals with Leisure. Their past investments include Underwater World Singapore, Chengdu Haw Par Oceanarium, L’Aquarium Barcelona, golf driving range and bowling centres. Haw Par currently own and operate the Underwater World Pattaya in Thailand, which was launched in 2003.

Property

Haw Par currently owns a few properties in Singapore and Malaysia, namely Haw Par Centre, Haw Par Glass Tower, Haw Par Technocentre and Menara Haw Par.

Haw Par Centre and Haw Par Glass Tower are two adjacent office buildings located in Clemenceau Avenue, a stone’s throw away from the heart of Singapore’s Orchard Road. Haw Par Technocentre is a light industrial building located in convenient and quaint Commonwealth Drive.

Menara Haw Par, a freehold commercial building in Kuala Lumpur, is located in the Golden Triangle along Jalan Sultan Ismail.

Investments

These are investments made by Haw Par, consisting mainly of strategic holdings in United Overseas Bank Limited, UOL Group Limited and United Industrial Corporation Limited. The banks are doing well in 2018 and probably this is why investments forms a large portion of Haw Par’s earnings as you can see from the pie chart above.

Management

Dr Wee Cho Yaw, 90, was appointed Chairman of the Company since 1978. He was banker with more than 60 years’ experience.

You can read more about the history of Haw Par from their website. Back in the 1970s to 1980s, 3 corporate heavyweights fought for the control of Haw Par, namely Hong Leong Group, Jack Chia Limited and United Overseas Bank (UOB) that was headed by Wee Cho Yaw. UOB emerged victorious and in 1992, Haw Par took back Tiger Balm and Kwan Loong from Jack Chia after the expiry of the 20-year licence.

The important thing I want to emphasis here is under the leadership of Chairman Wee Cho Yaw, Haw Par grew steadily in assets as it sharpened its focus and divested itself of most under-performing and non-core businesses.

Financial

Market Capitalization

As of 13th September 2019, the market capitalization is estimated at S$3.09 billion. Thus, Haw Par is classified as a large cap stock. The total number of shares stood at 220,841,000.

Revenue

Based on the last 5 years results, Haw Par was able to grow its revenue year on year.

2018 2017 2016 2015 2014
Revenue ($’million) 237.8 222.8 201.4 178.8 154.2

Cashflow

The cashflow is healthy. If we look at only profit from the Healthcare, it is still sufficient to cover the expenses and profit is increasing year on year for the healthcare sector. On the other hand, profits from Investment and Others (Property & Leisure) are rather unpredictable and inconsistent over the last 5 years.

2018 2017 2016 2015 2014
Profit from Operations ($’000) 190,989 136,905 133,064 135,249 107,944
-Healthcare 77,252 68,579 66,051 48,122 33,885
-Investment 105,508 60,217 61,366 88,419 66,850
-Others 12,322 12,674 8,935 1,521 10,858
-Unallocated expenses (4,093) (4,565) (3,288) (2,813) (3,649)

Debt

Haw Par is not debt free but the company has kept its debt very low.

2018 2017 2016 2015 2014
Total Debt (S$ million) 23.25 45.05 45.80 43.55 56.33

Dividends

Haw Par has been consistent in their dividend pay out over the last 5 years. As you can see below, the norm is 20 cents. In 2018, Haw Par paid out a dividend of 115 cents whereby 30 cents is the ordinary dividend and 85 cents is the special dividend.

Based on the closing price of S$14.00 on 13th September and an ordinary dividend of 30 cents, this translate to a dividend yield of 2.14%. If we include the special dividend, this translate to a dividend yield of 8.21%. We need to be careful here as not every year does Haw Par pay out special dividends.

As such, I will take the more conservative dividend yield of 2.14%. In the event ordinary dividend drops to 20 cents in 2019, this will translate to a current dividend yield of 1.43%.

2018 2017 2016 2015 2014
Ordinary (cents) 30 20 20 20 20
Special (cents) 85 15

Current Valuation

As of 16th September 2019, Haw Par is trading at S$13.95. This is 5.2% premium above the net asset value of S$13.26 per share.

Strength and Catalyst

Brand Loyalty

Haw Par is the owner of the iconic Tiger Balm Brand. The brand loyalty is an obstacle to new competitors in the market.

Secret Formula

Tiger Balm is made from a secret herbal formula. There is no products currently in the market that can fully substitute Tiger Balm.

Organic Growth

The revenue from its Healthcare segment is no joke. For the past 5 years, you can clearly see that revenue is growing year on year. Haw Par also tries to diversify its business by venturing into the Leisure, Property and Investment segment. In my opinion, this is a growth stock.

Investment Risks

Non Core Businesses

It is good that Haw Par ventures into Leisure, Property and Investments, however venturing into these businesses can be a risk to the company as well. You can see that Investments form such a big chunk of Haw Par’s revenue, thus any volatility can impact its performance.

Conclusion

I shall not invest into Haw Par because as a dividend investor, the current dividend yield (exclude special dividends) is simply too low for me at 2.14%.

2 thoughts to “My Personal Analysis of Haw Par Corporation Limited”

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.