It is unreasonable for the market to price HLIND at least RM 2 lower than its fair value just because of this expected -10 sen quarter EPS as a result of MCO. The money is yours to grab, as much as you need, to buy at current price and wait for 15 to 20% appreciation in 4 months time.
Look around other stocks of matured business which could fetch EPS more than RM 1 annually, their share price is around RM 14. So it is quite conservative to predict HLIND to achieve RM 11 or higher when its EPS normalizes to RM 1 or higher annually.
I beg to be differ. This 2022 Q1 result is far better than what I predicted. With this result I'm a lot more confident that HLIND will achieve RM 0.90 to RM 1.00 annual EPS for FY 2022. If this is real share price will have very good chance to go up to RM 11.00 or higher by end of FY 2022.
The fact that the company continues to declare a 17 sens interim dividend for the poor 1st quarter results only means one thing. Management believes that the next three quarters will produce good results. If the coming two quarters show good results, the final dividend may be maintained despite the setback in the first quarter. We are talking of 52 sens for 2022 financial tear. In the next three quarters, there will be higher sales and profits because the company will be in full production and demand for its products will pick up. The uncertainty now is that we do not know how Yamaha Vietnam will be doing in the next three quarters. This quarter is the first time they are making losses instead of contributing profit to the group. The other good news is that the group is still cash rich and maintaining good dividend payout despite lower profitability is not a problem.
Very likely result is already good in Oct and Nov so that the management made a statement where "barring any further MCO, result for FY 2022 will be satisfactory". Furthermore, in general, Malaysian's income has reduced in the past two years and many M40 has now fallen into B40. These people are then motivated to opt for a cheaper mode of transportation which is motorcycle instead of car, due to affordability and the need to rebuild their emergency fund. Lesser disposable income will also encourage them to save recurring fuel and maintenance expenses which can only be feasibly achieved by choosing motorcycles.
80% of the profit comes from market in Malaysia. Contribution from Vietnam is only 20%.
Spread of Covid-19 and MCOs etc. will change the timing of motorcycle production and therefore the transaction but not reducing the demand (the demand should be increasing instead). Therefore recovery would be strong and quick.
@Thirai - What you feel is very normal if you just look at the surface of the number alone that happened 5 to 2 months ago because it is not a nice figure. However, to see beyond this or to be able to see the future, you need to digest this figure with OTHER INFORMATION. By checking the quarter result in MCO 1.0 and how the earning recovered after that would help you to understand. You may be able to observe that the company is now coping with MCO 3.0 in a lot more effective way to reduce the impact and also you may be able to see that the shock level to the shareholders is a lot less from how the share price curve changed.
This share is a growth stock + turnaround (from temporary issues). Growth stock generally gives you long term return and turnaround gives you short term return. With these two combined, you can expect a medium return at low risk in within a year. I don't think there would be any buying opportunity for this stock if it is without temporary steep drop of revenue and profit due to MCO 3.0.
1. Guocera Holdings Sdn Bhd Group’s new strategy is to move away from ceramics to focus on the mid to high-end market segments for porcelain tiles, particularly those with distinctive product features and concept- based selling. The immediate and long-term plans are to broaden and deepen market penetration for both domestic and international channels. (page 19 of Annual Report 2021(“AR2021”)) Apart from key international markets like Vietnam, Thailand, Singapore and Australia where the Guocera brand is well-recognised, what are the Group’s plans in terms of penetrating new international markets? What are the other new international markets that the Group targets to penetrate? Response: For Guocera, besides the few countries mentioned in the question, we also export to Europe, Middle East and America. With our focus on higher-end products, we are now able to offer a better concept range of products via our existing network of customers to improve the demand. 2. The Group’s revenue contributed by Singapore customers increased significantly to RM34.1 million (2020: RM15.3 million) (Note 30, page 129 of AR2021). Which of the Group’s products attributed to the increase in revenue from Singapore customers? What is the expected demand from Singapore customers for the Group’s products, going forward? Response: The significant increase in the Group’s revenue from Singapore customers in FY2021 as compared to FY2020 which was mainly contributed by Guocera Group was because of shorter lock-down period in FY2021. We believe that our higher-end products will also help to improve our sales from Singapore. impairment losses are disclosed in Note 30 of the Financial Statements (page 121 of 2020 Annual Report). 3. The Group’s 1st quarter ended 30 September 2021 (“1QFY22”) recorded 57.6% drop in revenue to RM277 million (1st quarter ended 30 September
2020: RM652.66 million), while profit before taxation (“PBT”) declined to RM6.2 million (1st quarter ended 30 September 2020: RM93.0 million). The lower revenue and PBT was due to lower sales across all product segments because of Movement Control Order (“MCO”), which caused the curtailment of production for 2 months. (Quarterly Report for 1QFY22) (a) With the gradual reopening and normalisation of economic activities, to- date, how and to what extent has it impacted the orders for the Group’s products? (b) Has the Group’s current production level normalised? Response: (a) With gradual reopening and normalisation of economic activities, the orders for the Group’s products have progressively improved towards the level prior to the recent lock down. (b) Although all our factories have resumed operation, there is continual disruptions to our productions as a consequent of COVID-19, supply issues and absence of workers due to quarantine. 4. The Group’s inventory has increased from RM212m in FY2020 to RM303m in FY2021. What is the reason of the high inventory on 30 June FY2021. (page 69, Statement of Financial Position) Response: The increase is mainly due to the increase in the CKD parts stocks in Yamaha operations. As the CKD parts were ordered 3-4 months ahead, the stocks have increased because of the continuous arrival of the CKD parts during FMCO period while the production was curtailed. 5. Page 22 of AR states that "Earnings, capital expenditure requirements, borrowings repayment, capital adequacy, dividend yield and other relevant factors are considered by the Board in determining the actual dividend payout." As of June 2021, net cash plus money market fund was RM1.25 billion or RM3.8 per share. The capex was only about RM50 million for FY2021. As asked in previous AGMs, does the Group have any concrete plan to substantially invest the excess cash in high return projects? Failing that, can the Board set a date to return excess cash to shareholders? This will help to increase the Return on Equity which has been declining. Response:
The Group has been gradually declaring higher dividend payout over the years with dividend yield around 5% at the current share price. The Group is likely to continue to declare dividend on this basis. 6. The share of profit from Vietnam's associate has declined every year from RM134 million in FY2017 to RM36 million in FY2021. Noted that the decline has started before the pandemic. What are the root causes? What have the Vietnamese management done to reverse the trend? Response: There was a strong competition on pricing in Vietnam market especially from the major competitor. Yamaha Vietnam will be introducing a new scooter model and this is expected to enhance the financial performance of Yamaha Vietnam. 7. HLI has exited the concrete roofing products and distribution of building materials. The performance of the HLI in the future will be dependent solely on the manufacturing and sale of consumer products comprising motorcycles, spare parts and ceramic tiles. With very strong balance sheet and strong cash reserves, can the Board/Management provide some updates/guidance to shareholders on expansion of current core business and potential new business that can reduce its dependence on the motorcycle business in Malaysia and Vietnam for its future growth. Response: Both ceramic tiles and motorcycles have great potential to grow their businesses. The Group will continue to explore on new businesses, both in terms of organic growth and inorganic growth. The Group will also continue to look for opportunity for potential merger and acquisitions. 8. How is Vietnam e-bike to affect Vietnam’s motorcycle industry? Will it affect Yamaha’s market share? Will Yamaha come out with e-bike in Vietnam? Response: E-bike market in Vietnam is still very early stage with only a few players involved, this hence would not affect Yamaha’s market share for the time being. Nonetheless, Yamaha Vietnam has included e-bike industry in its planning.
I attended the AGM. There were many questions asked and answered during the AGM that couldn't be found in the published minutes or Q&A documents!
I've noted a few. For example, there were questions about the number of shifts for the Malaysian motorbike plants (mostly 2 shifts), utilization (80% of current capacity), downtime due to parts shortages (affecting overall production 10% to 15%). There was also a question about frequent changes of senior management in the past few years (they replied it's fine).
The person preparing the minutes is too lazy! It deprives important info from shareholders who couldn't attend the AGM.
He only did the bare minimum to comply with the listing requirement which dictates that listed companies must produce a "Summary of Key Matters Discussed" after their AGMs. Companies much smaller in size than Hong Leong Industries have done better!
I hope someone in the company senior management or the board will read this message.
If you can't do somethings like spending an extra 30 minutes to produce a more complete minutes, how could we shareholders expect you to protect our more important interests?
Hi Observatory, I observed the same too. Actually there's one more thing about hiring of operators. Perhaps some of the info are sensitive to be disclosed. However I agree with you that they should at least give a proper explanation to us. Probably next time we can ask to change the share registrar company. According to the rule the minutes have to be signed by HLIND chairman before it can be published. Either the chairman has also not performed a good job at this or there are other problems we do not know.
Given the following situation: 1) 2 shift production (3 shift for certain models) 2) 10% to 15% downtime due to part shortage 3) hiring more operators 4) 80% capacity utilisation I believe that: 1) demand of motorcycles is high and will remain high (new hiring won't happen just to fill back log) 2) critical part supply (could be chip) is hand to mouth situation due to tight supply and high demand at the same time 3) there's capacity to absorb increasing order and hiring more operators can then be making sense All these together with other data, next quarter result will be very satisfying. I would be surprised if it is not.
"With growing demand for Yamaha's products, HLYM's capacity expansion plans were expedited to fulfil the piling orders and to meet the future growth of the business. Several new facilities have been installed and mass production commented in FY2021 to increase supply output. A new assembly line and inspection facility, equipped with the latest motorcycle evaluation technology, were installed to produce motorcycles of the highest quality." AR 2021.
I read from somewhere that Yamaha has been agressively increasing the number of motorcycle service centre in Malaysia but I couldn't recall the source of the information. Maybe someone else here could help.
I believe HLIND (Hong Leong Yamaha) like many other companies that produces branded and quality products pay higher than minimum wages to retain skill and productivity. So the impact should be minimal. Also, raising of minimal income domestically means more B40 can afford motorcycles which is their favourite choice of transportation. Therefore I think the positive impact should be higher than the negative impact.
As a result, labor intensive and low productivity business will be flushed out over time. Service sector including restaurants and hotels will be more challenging. Leaders in the manufacturing sector that produces excellent products that help the productivity of the B40 and M40 (domestic and export) such as home appliances, motorcycles, furniture etc. will remain profitable and continue to enjoy growth because they are able to not only pass the cost to the customers but increases the price moderately as the purchasing power of the lower classes improve globally.
The increase of minimum wages are always connected to very high exports. I believe government's faith and courage to increase the minimum wages mainly comes from the result of very good and sustainable export.
the frequent upward adjustment of min wage level is due the weak ringgit and political expediency. govt looks good for raising the min wage level but if that is not accompanied with increase in productivity, industries and consumers will suffer.
Hi zzprozaz, it is a good result as long as sales is more than 40,000 units. Anything above that is excellent. This is expected because lots of people trying to avoid the sst by buying before 1st Jan 2022. If every month can maintain 41,500 then annual EPS should be quite satisfactory.
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