Highlights
KLSE: HLIND (3301)       HONG LEONG INDUSTRIES BHD MAIN : Consumer
Last Price Today's Change   Day's Range   Trading Volume
7.42   -0.03 (0.40%)  7.40 - 7.47  91,500
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Overview

Market Cap: 2,433 Million
NOSH: 328 Million
Avg Volume (4 weeks):49,333
4 Weeks Range:7.35 - 7.70
4 Weeks Price Volatility (%):
20.00%
52 Weeks Range:6.04 - 11.00
52 Weeks Price Volatility (%):
27.82%
Average Price Target: 8.63
Price Target Upside/Downside: +1.21

Financial Highlight

Latest Quarter | Ann. Date 30-Jun-2020 [#4]  |  26-Aug-2020
Next QR | Est. Ann. Date: 30-Sep-2020  |  26-Nov-2020
T4Q P/E | EY: 14.36  |  6.96%
T4Q DY | Payout %: 5.42%  |  77.85%
T4Q NAPS | P/NAPS: 5.1153  |  1.45
T4Q NP Margin | ROE: 9.74%  |  10.10%

Headlines

Date Subject
27-May-2020 Mplus Market Pulse - 27 May 2020
30-Apr-2020 下跌股:丰隆工业RM8.07支撑
11-Apr-2020 下跌股:丰隆工业RM7.64支撑
25-Dec-2019 上升股:丰隆工业阻力RM10.60
11-Dec-2019 下跌股:丰隆工业RM9.64支撑
26-Nov-2019 上升股:丰隆工业阻力RM10.60
14-Nov-2019 Daily Technical Highlights – (CIMB, HLIND)

Business Background

Hong Leong Industries Bhd is a Malaysia-based company that primarily operates through two segments. The company’s consumer products segment manufactures, assembles, and markets consumer products, including motorcycles, scooters, and related parts, and produces ceramic tiles. The industrial products segment produces and distributes industrial products comprising fibre cement and concrete roofing products. The company also has associates that are involved in motorcycle manufacturing and distribution, as well as newsprint manufacturing and marketing. Hong Leong Industries generates the majority of its revenue from the Malaysian domestic market.
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  5 people like this.
 
Snowpiercer Building material and marketing businesses will be badly affected which is expected.
17/06/2020 10:15 AM
limkokthye hong leong will be holland industri
26/07/2020 7:33 PM
limkokthye hong leong will be 2.00 soon
06/08/2020 12:34 AM
limkokthye holland industri is stagnant liao, come to glove
21/08/2020 10:38 AM
ongkkh Hello Kywoo, can you give your view on the latest Qtr results?
26/08/2020 9:41 PM
limkokthye holland industri , keong gan loss money
26/08/2020 9:46 PM
tclittley HLIND release latest quarterly report yesterday, my analysis:

Prelog: many people thought that HLIND involved deeply in construction industry, but the fact is HLIND generates most of its revenue and profit from selling Yamaha branded motorbikes from its majority owned subsidiary of Hong Leong Yamaha Motor.

Reporting Quarter performance

1) The reporting quarter (FY2020Q4, quarter ended 30 June 2020) is a non-comparable, non-repeatable quarter for most businesses in Malaysia, especially for local consumer market (e.g. motorbikes market for HLIND).

2) However, HLIND managed to deliver positive gross profit (though only 15% GP margin compared to 19% in normal quarter) at reported revenue which was less than half of normal period (imagine your factory closed & your customers closed shop, but you still need to continue depreciation, pay basic salary to workers, keep machines warm etc.)

3) Net loss after tax for the quarter = RM25.5 million for the quarter. Remember this is Q4 result, with some year-end accounting impacts: loss of RM11.1 million from discontinued operation (will not repeat in future) and damage of RM11.8 million due to impairment of assets (likely will not repeat in future, with probability of reversal). To take out the 2 factors, net loss after tax will reduce to RM2.6 million and it will turn loss before tax to small profit before tax (which is an incredible performance for MCO period for a mainly local consumer market based company).

FY2020 performance and prospect:

4) At least 2 months loss of motorbikes sales (biggest revenue and profit contributor), mostly happened in last quarter. Assuming sales in first half (July – Sept 2019) are normal and average, the whole FY2020 sales lost averagely 2.3 months of revenue due to MCO.

5) Despite lower sales, HLIND still delivered RM169.4 million of profit after tax attributable to shareholders, i.e. RM0.54 per share.

6) MCO kind of lockdown is an UNLIKELY event to repeat in FY2021. Revenge sales pick-up will happen in at least next reporting quarter (due to MCO loss of sales in previous 2 reported quarters), i.e. FY2021 sales will be higher compared to FY2020, and expectedly better profit.

7) History trend: Bad economy (before Vaccine for COVID-19, a likely event) is beneficiary to motorbikes sales (people tend to buy motorbikes instead of cars when economy is not good).

8) HLIND's bad business portfolio like Hume Roofing has been discontinued. This will contribute positively to HLIND's overall result in FY2021 (info: the discontinued operation had burdened HLIND with RM10 million of loss or 3 sen per share in FY2020 alone (or 90 sen potential price upward if valued at 20x P/E for this discontinuation of operation event alone).

Others:

9) Solid overall Balance Sheet:
- Cash & bank balances stood at RM1.2 billion, with negligible borrowings.
- Current ratio: 5.21 (> 1.5 consider particularly healthy)
- Quick ratio: 4.55 (> 1 consider particularly healthy)
- Gearing: N/M (net cash company, gearing is not meaningful)

10) Strong cash flow:
- Operating cash flow of RM423 million (> net profit) (RM1.35 per share)
- Free cash flow of RM375 million (> net profit) (RM1.19 per share)

11) Other Financial Indicators (assuming share price of RM7.70):
Net cash per share = RM3.80 (49.45% of share price)
Equity per share = RM5.34 (69.35% of share price)
P/E (FY2020) = 14.3x (< 25x (4% ROI) considered good buy, given HLIND’s strong balance sheet health)
EV/EBITDA (FY2020) = 3.0x (< 10x considered good buy)
Dividend Yield = 5.5% (> your FD interest rate, now < 2%, considered good already)
Z Score = 7.27 (testing health for bankruptcy, > 3 considered healthy)

Conclusion:

Good health (extremely good Z Score, no risk of bankruptcy), good prospect (motorbikes are still selling well in Malaysia, especially when economy is down), good product (Yamaha is the best-selling motorbike brand in Malaysia), good P/E, good EV/EBITDA, good dividend (even based on performance badly hit by MCO and COVID-19). What else to expect?

Target price: RM12.00

Even for RM12 future target price to apply to FY2020 one-time MCO affected performance, you still get:
- P/E = 22.2x (4.5% ROI)
- EV/EBITDA = 6.4x
- Dividend Yield = 3.5%
Still an ATTRACTIVE investment, isn’t it?
(Don’t forget, it is highly likely that FY2021 will be a lot better than FY2020)

Writer’s interest: 2,500 HLIND shares held at RM7.68 average cost.

Regard the writer: I wrote above mainly for other purpose. I visited i3investor as guest on and off and never commented anything. This is my first comment of any kind, just sharing my writing and not to waste it.
27/08/2020 11:52 AM
alexnada tclittley, thanks for the indepth analysis on HLIND. I have been having waiving heart to sell of my holdings but your analysis gave me confident to continue to hold for long-term.
27/08/2020 12:04 PM
antoniomc27 tclittley your kind of analysis is why it is still valuable to drop by 3i. Thanks a lot. Good QR given the situation, agree with you. And yes. fair value of this company should actually be rounding RM 12.
27/08/2020 12:54 PM
tclittley Back to fair value computation based on future perpetual discounted Free Cash Flow (FCF) model adopted by Gemstar back on 17 April.

(Warning: technical dry stuff ahead)

I change some assumptions to be more conservative and some to actual value (still perpetual):
Free cash flow = RM366m (FY2020 actual FCF, also deduct investment in intangible asset)
Growth Rate = 0%
Discount Rate = 9.83% (per Gemstar’s working)

Since there is no assumption of change of growth rate, the terminal value as at end of FY2020 will equal sum of future perpetual discounted FCF.

Terminal Value as at end of FY2020 = RM366m X (1 + 0%) / (9.83% - 0%) = RM3,723m

Fair Entity Value = Terminal Value as at end of FY2020 = RM3,723m

Fair Value per share = RM3,723m / 314m shares = RM11.86

Judge yourself if you are agreeable to the assumptions made, especially:
- RM366m of FY2020 FCF, fair?
- at low side due to MCO? or
- at high side due to lower sales (so changes on working capital at the positive side)? or
- FY2019 FCF = RM402m
- 0% growth rate, fair?
- Ignore inflation rate?
- Ignore population growth rate?
- Ignore urbanization growth rate (and motorbikes usage will go down)?
- Perpetual (i.e. HLIND will live forever), fair?
- still somehow acceptable for 0% growth rate assumption
- well, if HLIND could continue this operation level for long enough, say another 30 years, there is almost no difference to perpetual for this purpose (30 years = 98.5% of perpetual, 20 years = 88.7% of perpetual, 10 years = 63.8% of perpetual, with 0% growth rate and 9.83% discount rate).

Side note: Assuming 3% growth rate to somehow reflect inflation rate compounded with population growth rates, the fair values above will increase by a whopping 48%.

Another side note: assuming FCF per year = RM402m (FY2019 actual), and all other assumption no change (including 0% growth rate), this gives fair value per share = RM13.02.

Yet another side note: Perpetual discounted future FCF assumption means assuming no converting of fixed assets and other current assets (minus liabilities) into cash at the end of business (because no end of business). But cash is cash, in fact, current cash and bank balances (minus borrowings to be fair) should be added on to the terminal value (also the discounted future FCF), which will add another RM3.80 to the fair values per share computed above.

So, fair values =
RM15.66 per share (RM366m FCF assumption), or
RM16.82 per share (RM402m FCF assumption)
(both with 0% growth rate, 9.83% discount rate and perpetual assumptions)

Above are just products of mathematics, judge yourself for your own investment.
27/08/2020 2:24 PM
tclittley Sorry, same mistake made, forgot to account for non-controlling interest (minority interest).

While, without full information, there is no way to segregate the cash flow and cash & bank balance between HLIND's shareholders and minority shareholders of subsidiaries.

To make thing simplified a bit, just assume all the cash flows and cash & bank balances are 100% from Hong Leong Yamaha Motor, then discount all fair values above by 30.4% will do.
27/08/2020 2:36 PM
BURSA of Billionaire 1. VS
2. Appasia
3. topglove
4.supermax
5.IJM
27/08/2020 2:53 PM
Snowpiercer Should get rid of all its building product businesses.
28/08/2020 11:21 AM
limkokthye holland industries liao, nowdays makan pun tak cukup, jobless, where got $$$ to buy motocycle?
02/09/2020 4:12 PM
Bao2lai The stylish still yet can replace by iphone.. smartphone model etc or perhaps future smart glasses. For those who dont have buy and holding power, and eager to search for short term gain perspectives, its truely unwise to invest in this so call holland industries.
04/09/2020 1:23 AM
kywoo Hi tclittley. Your analysis on the worth of HLI is very comprehensive and for most part correct. I have been very bullish on the counter since I discovered it four years ago. I felt that it was very much under valued. I started to accumulate the shares from 4.42 onwards and my average cost now (after deducting all dividends received ) is about 5.00. So at around 7.50 today I still made a gain of 50% over a 4 years period. I am one of the top shareholders of the company and I intend to stay put as i have full confidence in the management and business prospect of Yamaha bikes in Malaysia. I honestly believe the stock is worth much more than current price because of its very strong financials and good sales of Yamaha bikes in Malaysia The point you totally miss out is Yamaha's performance in Vietnam. Of late profit contribution from its associate company in Vietnam keeps dropping. In fact in last quarter, there is a small loss. This will dampen the share price of HLI in the short run. If and when Yamaha Vietnam recover from its past glory and the building materials sector improves its profitability, then your target price of 12.00 or more is possible. In the immediate future, a likely bullish price would be around 10.00 to 10.50 level.
05/09/2020 1:27 PM
SilverHawk FY 2021, EPS around 0.73 to 0.80, dividend wise will be at least 0.42. If EPS come at 7.50, Div 0.42 ( based on FY 2020 dividend amount on bad FY, more than 0.42 is a bonus ), current valuation is PE 10 DY 5.6, no way to fail.

Q4 FY 2020 should be the worst Q so far, and company should be able to avoid the Q4 performance again on economy reopening.

On Vietnam side, profit contrIbution around 40M to 60M is justifiable based on latest competitive environment, ie. strong Honda and new E bike. ( How effective is Yamaha turnaround plan is still unknown. )

On Malaysia side, to be safe, chop off 20% profit from past peak performance ( better performance than this will be a bonus )

One of the best timing to buy a good company is when they were hitted with TEMPORARY disaster !!
06/09/2020 4:47 PM
PuppyKitten On company boardroom change and Hume Roofing Product discontinuation, here are some CLUES on future corporate direction :

1. Dato Jim Khor, previously HL Yamaha MD, now become Hlind MD.
2. Discontinuation on Hume Roofing product .

Seems HLIND will solely focus on Yamaha ONLY in very short future.

Industrial product run by Hume Cemboard and Hume Roofing Product. Hume Roofing Product now ceased operation. What about Hume Cemboard ?

Very likely will be stopped also, or to be sold to Hume Industries under QLC corporate exercise. Just wait patiently if this happened. If eventually sold, this will be a boost to company cash position.
With money losing business unit being sold / stopped, future dividend payout will be increased accordingly.

Dato Jim Khor , a key person on HL Yamaha Malaysia, now Hlind Group MD, a huge signal that group will be fully focus on Yamaha, and HLIND shall change its name to Hong Leong Yamaha Malaysia Bhd soon.

By the time come, HLIND will be valued as a consumer company with simple product, HOPEFULLY with PE more than 10, rather than a conglomerate with diversified business division, where such company always valued at a huge discount due to difficulty to value each business unit.
07/09/2020 9:35 AM
Snowpiercer Don't forget, apart from Cemboard, there is this dying Guocera. From bad to worse
07/09/2020 12:02 PM
PuppyKitten Deliberate dumping is over. Slowly back to its value ^
07/09/2020 2:56 PM
x3mg33 @puppykitten....i agree on the new appointment of the GMD. the company has been flying on autopilot all these while, indicating that the company can still produced strong results without much stewardship.

I strongly hope with the new appointment will send an indication of more good things to come for this company. In yamaha we believe!
08/09/2020 9:02 AM
PuppyKitten Share price completely manipulated.
Press down, side way, move up ...
08/09/2020 6:54 PM
PuppyKitten I have ask around the consumer market and few motorcycle shop ( small shop ) this few days. I was told there is long waiting period to get new Yamaha stock.
1. Is there over demand in the market for Yamaha new bike ?
( On revenge purchase after MCO )
2. Is there any disruption on Yamaha production line ?

Can anyone closed to the market can provide this answer ?
My sampling size is small, so I not so sure of the response I get.

For furniture, electrical shop, I was told the demand is very encouraging, out of their expectation ( post MCO ) as revenge buying really happened. Another reason of huge jump in furniture and electrical product demand is due to cash grant from government.

If the cash grant and revenge purchase do really happen, next QR will be very good !!
For production disruption, I think that the chance is quite slim.
But anyhow, still need to find out the answer
12/09/2020 6:47 PM
ThePowerOfGlove down 0.53%
12/09/2020 6:48 PM
ThePowerOfGlove lagi tidor juga kah
12/09/2020 6:48 PM
ThePowerOfGlove still hibernating juga kah
12/09/2020 6:48 PM
ThePowerOfGlove apa daah
12/09/2020 6:48 PM
ThePowerOfGlove dont know when going to move
12/09/2020 6:49 PM
ThePowerOfGlove no idea
12/09/2020 6:49 PM
ThePowerOfGlove no clue
12/09/2020 6:49 PM
x3mg33 @puppykitten sales are picking up in most retail businesses as consumers are happy to spend on material purchases in the absence of travel plans and also impulse buying in these depressing times.
also not forgetting the governments initiative in sales tax exemption on motor vehicles to spur the purchases is timely and should see higher sales throughout the rest of the year.

HLYM has been launching new models lately, check out motomalaya on FB yo keep up with the motorcycle launches. What is lacking in the industry is the monthly sales report by names, similar to those done on cars. I can’t find this report crucial in gauging how well the demand for motorcycles and yamaha is in the market. I’m sure there’s such report but have exhausted searches in google and other motorcycle fan pages on FB.

Anyway, the Q2 results come november is the one to look for and to prove our guess in revenge buying is a reality!
12/09/2020 11:02 PM
RainT @x3mg33

you have high confidence with HLIND uh

good...
12/09/2020 11:27 PM
PuppyKitten Thks x3mg33.

https://www.themalaysianinsight.com/s/248165

From the link, we see very strong motorcycle sales in January February, but hit in March due to MCO.

May have seen recovery , and further increment in June.

I m still looking at July data, but same as u, find no where.

Will update again once I have the data on long waiting period.
13/09/2020 9:13 AM
PuppyKitten https://www.motorcyclesdata.com/2020/07/25/malaysia-motorcycles/

Finally I found out that the data in this link are not so accurate .
Data between two link not matched.
13/09/2020 9:20 AM
x3mg33 @puppykitten thanks for the data link, very useful.
i quote the part from the link .....’ In any case, over 60% of the market is in the hands of the two biggest Japanese companies, with the peculiarity that the market leader is Yamaha, not Honda.....’ speaks volume. I wish they have more of such reports available to investors.

@RainT....i have studied and learnt a lot from this company since I started investing in this company back in 2015 and have collected and held positions over the years. I’m no one...but just an ordinary investor who buys into the fundamental strength of what a company can deliver. One can see this through the financial statements. This company has always been shy from the crowd and refused coverage by analysts ( vice versa) due to it’s high price inelasticity. Not many people know of their core business, ie yamaha manufacturer and distributor, as many are still confused other industrial products, eg roofing and ceramic tiles. Therefore, I can only hope in time to come, company restructure exercise to spin-off the irrelevant segments of the company and concentrate on the core business of motorcycle.

Unfortunately the current market is fueled with noise and speculation, the KLSE index is no longer weighted by fundamentals but dominated by the healthcare and gloves sector. I can only be patient and ride through this episode like everyone else.
13/09/2020 10:58 AM
humongainz actually well ran company
13/09/2020 8:07 PM
ykloh Motorcycle is basic transportation for many. Will show far better resilience.
13/09/2020 8:21 PM
PuppyKitten I just called Hong Leong Yamaha.
The answer provided to me is :
1. Production is normal, no disruption, with over time working.
2. Demand is good after MCO.
14/09/2020 3:46 PM
Snowpiercer Non-Quek MDs are all puppet. The family is out of touch with manufacturing. Making billions in banking.
14/09/2020 6:28 PM
reloyee from what i heard from yamaha dealers, the factories are facing production hiccups because of parts supply issues and social distancing in factory resulting in much lower production at least until this year end. this caused the market to have very limited yamaha motors, making the demand for yamaha motors very high because of limited supply
14/09/2020 6:52 PM
kywoo I have done a rough estimate on the profit contribution from the various business sectors of the company for 2019 and 2020. I have to say I cant get 100% accuracy and that is because the company combines the motorcycle business with the ceramic business under consumer business in their financial reporting. It is totally unfair to minority shareholders and the financial reporting is not transparent. Luckily, because we have the 31% minority shareholding in the motorcycle subsidiary we can postulate the profit from the motorcycle business as a whole to the company.
2019 2020 % change
Net Profit to company RM409m RM239m - 42%
Contribution from local motorcycle sales RM273m RM233m - 15%
Contribution from Yamaha Vietnam RM90m RM40m - 56%
Contribution from others(mainly building materials) RM46m (RM34m) NA

So the biggest problem to the company is the building materials sector. Instead of making RM46 million in 2019, it now made a loss of RM34million in 2020. Hence there is a negative impact of RM80 million within 12 months.
Actually, the Vietnam operation is also very disappointing. In the last few years, their business and profits were growing steadily. Suddenly, in 2020 their business just gone down. I hope company will let us know the reasons in coming Annual Report.
The real jewel in the company's business is the local Yamaha motor cycle business. It is currently the market leader with about 42.8%(estimate) market share, hence overtaking Honda. It is still growing both in terms of volume and market share. I understand that their sales are very good in July and August this year because of pent up demand. Remember that there were no production and sales for more than 2 months during the MCO period. Total sales and profits from local motorbike business in coming financial year should be much better.
I really hope the company would be more transparent in their next annual report. Otherwise minority shareholders and potential investors will have to do a lot of guessing work.
14/09/2020 7:11 PM
SilverHawk Kywoo, on last AGM, Mr Chairman said that they will expand the production capacity by 30%. Do u have the status on the expansion ?

If the expansion is completed, and still facing with tight supply, this is a very positive sign.
14/09/2020 8:02 PM
kywoo Based on all previous annual reports I read I understand that the Yamaha factory has excess capacity to increase production by about 30%. I believe that factory has not reached 100% capacity yet. There is no harm to increase production capacity further to anticipate spike in future demand.
15/09/2020 2:14 PM
Sohai Trader Good counter indeed, but the company should consider expanding their businesses with their ample cash in hand. THe companies have been doing a very good job in fortifying their cashflow and I am very impressed with that.

That being said, the company should actively looking for opportunities to expand their businesses, either by acquiring new profitable businesses or trim out those loss-making businesses.

I do have faith in the top management, will definitely find a chance to grill them during the AGM.
15/09/2020 4:46 PM
PuppyKitten If 100% dividend payout, PE will easily shoot to 20 with DY 5%, same like carlsberg heim
15/09/2020 6:58 PM
PuppyKitten Nanyang Siang Pau 20:/9
July Motorcycle sales 58K unit +5.5% yoy
August 51K unit . Almost same last year.

A robust quarter for coming QR !!
22/09/2020 3:20 PM
PuppyKitten Expected profit level around 70M+ EPS more than 22 cents dividend should be able maintain 17 cents. With such QR, price will easily back to 8.++ Level
22/09/2020 3:26 PM
Snowpiercer Get rid of Guocera and Cemboard. Otherwise, will continue to drag.
22/09/2020 9:52 PM
xgxgxg @kywoo and @silverhawk by any chance do you know why is there so little institutional ownership on the company?
22/09/2020 11:02 PM
RainT major 30% share holders already hold around 90% of shares

so how much inst shareholders can hold ....

major boss Quek Leng Chan hold a lot


its good thing actually
25/09/2020 10:51 AM


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