Posted by yklip > 2019-11-28 22:36 | Report Abuse

What a good news! Hopefully HLIND can go back to the valuation (PE12) before the delisting from syariah list..

Posted by RainT > 2019-11-29 16:57 | Report Abuse

listing back as Shariah compliant, share price also cannot up

hopeless

Posted by vegebird > 2019-11-29 22:12 | Report Abuse

Do u expect that the Islamic fund buy immediately once included in the shariah list?

Posted by remus > 2019-12-10 14:58 | Report Abuse

big drop today, volume not big but price gap up down so dramatic, what kind of show is this? who is the director and the intention is?

Posted by RainT > 2019-12-10 15:13 | Report Abuse

maybe is fund selling

not necessary is director or insider

Posted by RainT > 2019-12-10 15:14 | Report Abuse

exclude Shariah drop

include back to Shariah also drop

Posted by sosfinance > 2019-12-10 17:52 | Report Abuse

Dividend yield about 5.5% p.a. Based on latest few quarters, cash flow is growing double digits despite associate in Vietnam not performing. Based on this round dividend, it is higher than yoy, 17 sen vs 15 sen, hence the balance div is expected to be higher too. Cash position is crazily high at RM1.2 bil, special dividend is not impossible.

Posted by x3mg33 > 2019-12-10 18:48 | Report Abuse

Special dividend is not impossible no doubt but 1sen increment can also be special dividend. Don’t keep your hopes high my friends, lest you be disappointed ..... QLC has everything well planned out for all.... but unfortunate we are not on his gravy train.

Posted by shpg22 > 2019-12-12 10:20 | Report Abuse

Don't think they will give special dividend. The management prefer gradual increase in dividend. Giving special dividend will drive the price upward for short term. Good for punter but not beneficial for long term holder.

Posted by kywoo > 2019-12-18 17:19 | Report Abuse

I am in Vietnam right now on a holiday. Found out that Yamaha motorcycle sales took a hit last 12 months because they are slow in introducing new models. However 2 new models have just been launched and very well received. You can expect sales to pick up next few months.

Posted by Fabien "The Efficient Capital Allocater" > 2019-12-19 14:58 | Report Abuse

no IB analysts bother to initiate coverage on this company

it's sort of under the radar.

if only the company have some decent investor relations and get one or two analysts, interest in this stock should increase

Posted by kywoo > 2019-12-19 17:07 | Report Abuse

That was what I raised up in the AGM recently.

Posted by blackchicken > 2019-12-19 18:14 | Report Abuse

https://www.nst.com.my/business/2019/12/547577/nap-be-announced-early-2020

TANJUNG MALIM: The long-awaited revised National Automotive Policy (NAP) is scheduled to be announced in early 2020, said International Trade and Industry Minister (MITI) Datuk Darrell Leiking.

Posted by remus > 2019-12-20 14:15 | Report Abuse

@Kywoo, thanks sharing. Wow, on holiday & also survey the market at the same time.
Did u speak to the motor shop directly ?

Posted by kywoo > 2019-12-21 01:55 | Report Abuse

As I am holding a substantial block in the company I am following the company performance closely. Yes. I did talk to a few motorcycle dealers and they say the 2 new models of Yamaha are selling well. I cannot speak vietnamese but through a interpreter.

Posted by RainT > 2019-12-23 13:03 | Report Abuse

@kywoo

Didu notice majority is using HONDA bike rather than YAMAHA bike in Vietnam ?

Posted by kywoo > 2019-12-24 10:30 | Report Abuse

Honda bikes occupy 75% of market share while Yamaha occupy only 15%. Other models together only 10%. But Honda has an earlier start than all others and hard to be toppled. This was the situation in Malaysia 10 years ago. But today Yamaha overtaken them as market leader

Posted by wongck > 2019-12-24 13:43 | Report Abuse

@kywoo
Thank you and appreciate addressing this concern

Posted by kywoo > 2019-12-24 15:08 | Report Abuse

The main business focus for HLI should be in Malaysia. The motorcycle business is doing very well here. Contribution from Vietnam is at best a. bonus. Management here has totally no control over the operation there.
If ever Yamaha motorcycle market share improves in Vietnam it will be windfall to HLI. I believe Yamaha will recover and do better in next few years. If so, HLI shares will be worth a lot more.

Posted by RainT > 2019-12-30 11:00 | Report Abuse

@kywoo

thanks for information

YAMAHA vietnam is just associate and share of profit also will not big

Posted by blackchicken > 2019-12-31 08:55 | Report Abuse

Vietnam’s GDP growth in 2019 hits 7.02%: GSO
http://hanoitimes.vn/vietnams-gdp-growth-in-2019-hits-702-gso-300627.html

Posted by observatory > 2020-01-05 22:07 | Report Abuse

Can anyone explain this?

Refer FY2020 Q1 quarterly report.

1) The company cash pile generates very low interest return

Beginning cash and cash equivalents = RM1,039,941k
Ending cash and cash equivalents = RM1,190,067k
Average cash and cash equivalents = (1,039,941k + 1,190,067k)/2 = RM1,115,004k
Interest income for Q1 = RM940k
Annualized interest rate = (940k/1,115,004k) * 4 * 100% = 0.34%

The company has been accumulating cash for the past several years.

Given the management isn't in a hurry to distribute or deploy the cash, any idea why the management does not park the cash in higher-yielding FD?


2) High borrowing cost

Beginning borrowings = RM38,730k
Ending borrowings = RM38,110k
Average borrowings = (38,730k + 38,110k)/2 = RM38,420k
Finance cost for Q1 = RM1,142k
Annualized borrowing rate = (1,142k/38,420k) * 4 * 100% = 11.9%

The borrowing rate seems too high.


Even though the company has a cash balance of over 1 billion and borrowing of just RM38 million, the company incurs more financing costs (over 1 million in Q1) than in interest received (less than 1 million).

Do I miss something? Any idea?

Posted by kywoo > 2020-01-07 10:23 | Report Abuse

Yes. I went to AGM and got some explanation. Apparently, the company does not put all money in bank as fixed deposits. They put in money market. Income from money market not treated as interest income.

As far as cash management is concerned it is bad policy to keep so much assets in cash. At the moment cash holding represent about 50% of total company assets. So much so that company got delisted from Shariah compliance Index last year. Recently got back into index again because more cash put in Islamic funds.

Posted by observatory > 2020-01-07 11:28 | Report Abuse

@kywoo,

Thank you for your explanation. It makes sense now.

I checked the latest annual report. In the 2019 AR, page 98, Note 14 shows that most of the cash and cash equivalents are "deposit with licensed banks". I suppose this deposit refers to the money market fund that you've mentioned.

Yes, I agree it is a bad policy to keep so much cash.

If the company continues to grow its FCF as in the past few years this happy problem will become even more severe unless the management declares special dividends or engage in acquisition.

Or maybe the management believes its FCF growth will not be sustainable? The dividend contribution from its Vietnam associates, which used to be in excess of RM100 million per annum, is rapidly declining.

Motorcycle sales in Malaysia are also approaching the historic peak so future growth is likely to slow?

Posted by antoniomc27 > 2020-01-07 22:11 | Report Abuse

kywoo (and observatory and co), your presence, comments and insights is what makes this i3 so worth it.

It is reassuring to know that the management is aware of this issue and that they engage the topic with concerned investors.

In any case, I agree with observatory that it is not the smartest choice on the long term, so I will just hold my shares strong in the meantime and rely on their wise decision-making about cash allocation down the road.

Posted by observatory > 2020-01-08 22:48 | Report Abuse

I also benefit greatly from reading some of the valuable comments posted earlier. I agree the valuation is attractive.

Can anyone comment on Hong Leong Industries (HLI) future source of growth?

I've skimmed through the annual reports. So first let me recall what I've learned. Please correct if I'm wrong.

HLI business has 2 segments:
1. Consumer - motorcycles, marine, ceramic tiles
2. Industry - fiber cement board, concrete roofing tiles

The building material business has been struggling for years due to price competition from China; slowdown in domestic housing and infrastructure business; rising energy cost in earlier years; inventory problem due to the proliferation of SKUs. I suppose this business will not recover anytime soon.

The marine business is relatively new. No figure has been provided. Anyway, my impression is this is not a big and fast-growing market.

HLI cash generation power comes from its Yahama motorcycle franchise in Malaysia, and the 24% stake in its Vietnam associate.

<Malaysia>
In my view, the motorcycle revenue growth in Malaysia can be broken down into three components: total industry sales volume (TIV); average selling price (ASP); and grabbing market share from competitors.

a) TIV
It peaked at 592k in FY2013, then declined yearly to a low of 430k in FY2016, and after that recovered to 573k in FY2019. Volume grew strongly at 16% in FY2019 due to tax holidays.

Since TIV is now near the historic peak, I guess future growth will slow down. Let's say it reverts to 3%, which is the CAGR of the past 15 years (366k in FY2004, 573k in FY2019)

b) ASP
Due to the affordability issue, the increase in future ASP is constrained by the average income growth. Let's say 2%, which is my guess for the long term inflation rate.

c) grabbing market share
HLI market share has been stagnant. According to its earlier annual reports, its share was 33% to 36% between FY2007 and FY2012; and above 30% in FY2013-14. After that, HLI stopped reporting its share. From another source, I learned that in 1H2019 it has 36% share.

Assuming its market share stays constant, longer term motorcycle revenue growth rate will be about 3% + 2% + 0% = 5%.

<Vietnam associate>
The TIV in Vietnam has grown from around 2 million a decade ago to 3.29 million in FY2019. It contracted 0.3% in 2019.

Yamaha has around a quarter of market shares in the decade of the 2000's. It has 27% and 23% share in FY2017 and FY2018. It reported sales reduction in FY2019 but did not reveal the number.

The impression given is Vietnam business has also slowed.

Given both Malaysia revenue and Vietnam contribution are likely to slow down, the recent phenomenal growth in EPS (14% CAGR in the past 5 years) and FCF (27%) probably cannot sustain. This is because bottom-line improvement through cost-cutting and efficiency measures are not long term sustainable.

Does anyone agree or have a different idea? The other questions I have are

1. What are the competitive advantages of Hong Leong Yamaha Malaysia over Honda and other local companies such that it can maintain its market leader position? How might it gain/lose market share in the future?

2. If Hong Leong is truly good in this business, why can't it convince Yamaha to let it co-invest in franchises in other ASEAN countries beyond Vietnam?

Lastly, I repeat that the valuation seems attractive to me too. I just try to understand the growth aspect.

Posted by kywoo > 2020-01-14 13:52 | Report Abuse

Wow. Your writeup is so deep and analytical. You should attend next AGM to find out the chairman opinion. Hard for ordinary shareholders to give you an accurate answer because we do not have simple knowledge such as how many bikes are sold and what exactly is the market share. The lumping of motorcycle sales with that of ceramic tiles under consumer segment is most rediculous as one does not know how the tiles business is doing.

Posted by RainT > 2020-01-14 15:01 | Report Abuse

wow

thanks all for sharing good insight

Posted by observatory > 2020-01-14 15:26 | Report Abuse

The motorcycle sales volume data can be found in the Management Discussion and Analysis section of the Annual Reports. In some years overall market volume and market share were provided. In some other years own sales volume were revealed. There was no consistency. I compiled them year by year.

Posted by observatory > 2020-01-14 15:26 | Report Abuse

Unfortunately I can't attend the AGM. Appreciate if anyone who can attend can share what they've learned in the meeting.

Posted by observatory > 2020-01-14 15:27 | Report Abuse

Qualitatively, from a consumer standpoint, what drives people to buy a Yamaha bike versus other brands? I've tried to ask people around me but don't seem to get a good answer.

Posted by Rwkl > 2020-01-15 14:28 | Report Abuse

Well, if you were to ask a consumer what drives them to choose a BMW over a MB, I am sure you won’t get a good answer either. Anyway if you can’t be No. 1, No 2 isn’t too bad a thing....

Posted by x3mg33 > 2020-01-15 23:19 | Report Abuse

or a toyota vs honda cars in malaysia for that matter....

Posted by SilverHawk > 2020-01-16 12:05 | Report Abuse

Honda dominates world motorcycle industry with huge gap with main contender Yamaha. In most of the market , Honda market share is more than 70%，and some ( not many ) even more than 80%.

Yamaha, outperform Honda in some market where Malaysia is one of it ( but not many ). Honda dominated Malaysia long ago, due to its engine reliability. But Yamaha overtook Honda years ago, one of the very main reason is it's engine quality ( where Honda faced with huge quality drop in reliability. Reason for the quality drop unknown ) Another main factor that make Yamaha huge surge in Malaysia is its younger and dynamic design. Yamaha marketing and servicing effort is of another factor for the success for sure.

BUT ......

A giant won't let it's market share eroded simply without an effort to rescue them.
Eg 1. Coca cola set up own plant in Malaysia to market it's own product years ago ( divorce with F&N )
Eg 2. CEO Yamaha Vietnam was replaced by CEO Yamaha India to rescue Yamaha Vietnam. The effort hopefully can be seen after 2 quarter.

Last year, CEO Honda Malaysia was replaced by a Japanese to resurrect Honda Malaysia. ( I not sure ex CEO is Malaysian or Japanese )
Honda Malaysia market share is on the rise. We have seen Yamaha Malaysia still enjoying very fruitful profit. But this is due to enlarged TIV of motorcycle Malaysia where in fact Yamaha Malaysia is facing declining market share from over 40% to 36% now.

To be continue ....

Posted by Holyman > 2020-01-16 12:13 | Report Abuse

Best selling motorcycles brand [YAMAHA] in 56% mkt shares...easy fin from AEON CREDIT..target to 60% THIS YEAR.

Posted by SilverHawk > 2020-01-16 15:18 | Report Abuse

Current pop corn show now will be :

1. How is revival plan in Yamaha Vietnam
2. How is revival plan in Honda Malaysia
3. How willing Hlind to increase its dividend payout and how much increment and how soon

The 3 factor will decide how far Hlind share price will go

Posted by observatory > 2020-01-16 21:19 | Report Abuse

According to the website motorcyclesdata, Malaysia sales volume in 1H2019 was 257,480 units.

Yamaha sold 92,693 units (36% market share). Honda sold 79,800 units (31% share).

https://motorcyclesdata.com/2019/08/21/malaysia-motorcycles/

Posted by observatory > 2020-01-16 21:29 | Report Abuse

@Silverhawk, thanks for sharing the insight into competition between Honda and Yamaha.

I googled and found Honda is indeed the undisputable world leader. It 2019 the top 3 spots by revenue and units sold are:
1. Honda (US$18.59b, 19.554m units),
2. Yamaha (US$9.732b, 5.39m units)
3. Hero Moto (US$4.964b, 7.857m units)

(from https://www.mbaskool.com/fun-corner/top-brand-lists/17638-top-10-bike-companies-in-world.html)

Given Honda is a few times bigger, and maybe the ability to leverage on its car manufacturing, I wonder why it has not used its economy of scale to stay further ahead (or perhaps it's doing that now?)

One example is the rivalry between Intel and AMD. The much smaller AMD continues to stay in the game but has a difficult time catching up its larger rival who can outspend it in R&D.

Posted by observatory > 2020-01-16 21:41 | Report Abuse

The large cash pile at Hong Leong Industries makes little sense as historically the business doesn't need too much Capex after MPI was split... unless the management has some acquisition targets, or waiting for a time to fund the cash need for its controlling shareholder.

I wonder what are the chances of turning around its non-motorcycle business, or rearranging HLIND business portfolio like what it did a few years ago involving Hume Industries.

Posted by PuppyKitten > 2020-01-17 08:06 | Report Abuse

Few years ago, Yamaha market share 40% vs Honda 24%, and now 36% vs 31%. This is alarming signal though Yamaha Malaysia recorded historical high profit in Malaysia operation.

Posted by observatory > 2020-01-17 16:29 | Report Abuse

Yes. As Silverhawk has pointed out, the record-high profit in recent years coincided with enlarged TIV in the Malaysia motorcycle market.

As reported in HLIND annual reports, the TIV in recent years are
FY2016 0.430 million
FY2017 0.473 million (+10% YoY)
FY2018 0.494 million (+4% YoY)
FY2019 0.573 million (+16% YoY)

During the same period, the automotive market is flat:
CY 2016 0.580 million
CY 2017 0.577 million (-0.5% YoY)
CY 2018 0.599 million (+3.8% YoY))
CY 2019 0.600 million forecasted (+0.2% YoY)

While cars are big-ticket items, it still puzzles me why the motorcycle market can grow so fast/ is more volatile.

Did buyers forego cars for cheaper motorcycles when the economy was bad? It doesn't seem so as before 2016 motorcycle sales were in double-digit decline for a few years.

Posted by PuppyKitten > 2020-01-17 16:43 | Report Abuse

Demand for motorcycle or car, sometimes relate to demographic segmentation.

Posted by observatory > 2020-01-17 18:36 | Report Abuse

Yes. Demography affects the demand. However demography changes slowly as birth and death rates don't vary much from year to year.

There must be other reasons as demography alone cannot explains the large swing in motorcycle demands

Posted by SilverHawk > 2020-01-22 15:31 | Report Abuse

Yamaha Vietnam should had hit the bottom on last FY and last few Quarter.
Effort should had done on Vietnam operation.
Relocation of CEO India to replace CEO Vietnam will bring results to Vietnam hopefully. India is world No 2 motorcycle market but is No 1 market to Yamaha.

Vietnam contributed about 130M ( peak ) to HLIND profit however dipped to below 100M on last FY.
For new FY, with the good run on Malaysia operation, if Yamaha can contribute 60M profit ( 15M per Quarter ), we will see a better EPS to HLIND FY2020.

Hlind
10.10
PE slightly below 10
DY above 5

FPE will be further below 10 once Vietnam recovering
FDY will move forward nearing 6 regardless Vietnam performance on huge cash in hand.

Posted by warrior_gila97 > 2020-01-29 20:55 | Report Abuse

go jek , grab food, food panda, all need motorbikes. These business are still new in malaysia, demand for motorbike will grow, lets monitor the qr !

Posted by EngineeringProfit > 2020-01-30 18:00 | Report Abuse

Interesting................coming back here soon

Posted by RainT > 2020-01-31 17:44 | Report Abuse

Another downtrend counter

Posted by RainT > 2020-02-05 17:29 | Report Abuse

Grab another batch at 9.68 today

Posted by Godevil > 2020-02-07 15:50 | Report Abuse

Good to accumulate at current price, slowly averaging down.

Posted by RainT > 2020-02-11 16:18 | Report Abuse

When the share price want shoot up