Posted by Sardin > 2023-04-16 18:32 | Report Abuse

Hi Stockraider, I think Guocera should split from HLIND and pay the cash out as dividend so that we have the freedom whether or not to put that money into Guocera. So I think it has not done the best for shareholders like us. The earning and yield is still OK, but not attractive. It is a kind of stock you can only trust with a small percentage of your asset just like a stabiliser in a bottle of peanut butter.

Posted by Sardin > 2023-04-18 17:52 | Report Abuse

I hope the durian tree can give us durian this year.

Posted by Sardin > 2023-04-18 18:03 | Report Abuse

Hi Lionel Messi, targeted fuel subsidy in the brew as you expected.

Posted by lionel messi > 2023-04-19 09:38 | Report Abuse

Hi Sardin. Ya, it's a matter of when, not if. But likely after the upcoming state elections. Hope durian runtuh for motorbikes and our company.

Posted by stockraider > 2023-04-19 13:47 | Report Abuse

HLI another bluechip stock to consider loh!

Posted by lionel messi > 2023-05-08 11:32 | Report Abuse

Coming result and dividend going to be very good? Price movement is giving indication. Insiders are buying ahead? Go figure.

Posted by ykloh > 2023-05-08 15:32 | Report Abuse

Maybe also a bonus issue.

Posted by Sardin > 2023-05-12 12:19 | Report Abuse

Had been difficult to collect ticket. No seller below 9.20. :)

Posted by Sardin > 2023-05-12 12:21 | Report Abuse

The best timing to buy throughout the year. Isn't it? Very reasonable price just before the announcement of near record high quarter and annual result.

Posted by Sardin > 2023-05-15 11:53 | Report Abuse

Good quarter result and whole year result soon to be announced. Hope to get historical high of final and special dividend.

Posted by lionel messi > 2023-05-15 12:02 | Report Abuse

Go get some tickets Sardin. Got a few below RM9.20. Best time to nibble. Cheers.

Posted by x3mg33 > 2023-05-19 08:15 | Report Abuse

posted dividends of 37sen yesterday

Posted by Sardin > 2023-05-19 11:28 | Report Abuse

Although reported only 21 sen EPS, the actual EPS is 24.8 sen if we exclude the "demolition of useless assets of the old tile factory appeared to be 12 million on the book". Remembered I told ya one month ago they had demolished the Guocera old tile factory? Current share price is supported by sustainable and conservative dividend payout at 6% dividend yield. 2x FD rate with a very solid state of balance sheet. Not very exciting but something you could rate it as a "bond share" and especially good for people with very large capital to invest where capital safety is first with very reasonable return.

Posted by stockraider > 2023-05-21 18:27 | Report Abuse

good solid investment loh!

Posted by Fabien _the efficient capital allocator > 2023-05-27 11:43 | Report Abuse

HLI has been increasing their dividends over the years
2018 - 47sen
2019 - 50sen
2020 - 42sen (exception - covid hits)
2021 - 52sen
2022 - 52sen
2023 - 57sen
2024 - 60sen?

Posted by ChloeTai > 2023-06-05 16:01 | Report Abuse

Dear brothers/sisters, has our government made an official announcement regarding the removal of price ceiling caps on the prices of eggs and chickens?

Posted by Sardin > 2023-06-07 19:26 | Report Abuse

https://www.edgeprop.sg/property-news/bugis-enters-new-chapter-ongoing-rejuvenation
I think this complex will consume 10% output from Guocera after the new plant has completed.

Posted by Sardin > 2023-06-07 19:29 | Report Abuse

10% is conservative estimation. I think more expensive tiles will be used because the value of the building is already above 2k SGD psf.

Posted by Sardin > 2023-06-08 10:48 | Report Abuse

Total floor area 450,000 sqf. Assuming tile-able wall to floor ratio is 4:1, then
Total tile value = 450,000 * (4+1) * 7 *3.3 = RM 51,975,000 which is 2.1% revenue of HLIND or 21% revenue of Guocera in year 2022.
Assumptions:
1) Unit tile value = SGD 7 / sqf
2) SGD exchange rate 3.3
If more luxurious tiles are used then it could reach 30% of Guocera's revenue in 2022.

Posted by Sardin > 2023-06-08 10:54 | Report Abuse

By 2024 Ukraine war should have ended and will be a tile magnet at that time. This will cause Europe's tile price to increase and Malaysia's tile to gain pricing power in 2024. Although new house build is slowing down, most of the consumption in recent years are actually from renovation of existing buildings. Therefore the slow down in construction does not mean total demand for tiles is shrinking.

Posted by alexnada > 2023-06-08 12:24 | Report Abuse

Sardin,
Just want to know.
How sure are you that the new project you mentioned will be using Guocera's tiles? There are other suppliers also in the market, right?
Kindly enlighten.

Posted by lionel messi > 2023-06-08 16:49 | Report Abuse

Sardin is really a true student of HLI. Insightful. Thanks bro.

Posted by Sardin > 2023-06-12 13:12 | Report Abuse

Hi Alexnada, Guoco and Guocera linked to the same big boss, Mr. Quek. If I were the big boss, I will have 2 considerations here:
1. buy the tiles of the same quality at best price
2. buy from related company otherwise I'll be feeding competitors to fight against Guocera which I have substantial interest
So what would I do? Take the opportunity to upgrade Guocera so that it could produce higher quality tiles at lower cost. This will benefit Guoco land to get excellent tiles with reasonable price, at the same time provide return for investment to Guocera. If Guocera could not provide good quality tile at competitive price, then I will not spend 400 mil in Guocera, instead I'll slowly give up this business and get the tile supply from White Horse, Niro, etc. Make sense?

Posted by HamburgerOS > 2023-06-12 14:39 | Report Abuse

HLI share still tumbling, any insight why share moving downward beside after dividen distribution? is bit unusual price move downward so much?

Posted by Sardin > 2023-06-13 17:24 | Report Abuse

Hi HamburgerOS, 2 reasons, perhaps:
i) Motorcycle sales of Malaysia decline in Apr. But that should be normal as normally sales decline in the month when people celebrate Aidilfitri. Why? Because supply is usually limited in that month due to less production day in the factory. Another reason is a lot of people need to reserve their money to celebrate the festival. Therefore sales usually bounce back after that month but investors would like to wait to verify that there is no exception for this year as there are lots of headwinds this year due to inflation and rising interest rate, recession in US or EU etc.
ii) Many may not feel comfortable of large investment in tile manufacturing industry because they believe high interest rate will slow down property market which in turn will dent the demand for tiles.
Therefore, I think it takes two stages for the share price to grow from now. First stage will be achieved after resillient demand on motorcycles starts from May is observed. 2nd stage is when the tile manufacturing shows very positive contribution starts from 2025 when the new plant is completed.
However, it may be a lot simpler than it sounds. As long as the EPS could achieve close to RM 1, or close to 25 sen per quarter, then I think the share price will quickly reach somewhere close to RM 10. I think that's not too difficult to achieve because the actual earning in Q1 is already close to 25 sen excluding the impairment due to demolish of old tile plant building. Plastic and aluminum price (the main raw material for motorcycle) are already peaked and become less expensive in Q2 and this trend is likely to continue because crude oil and natural gas are both in down trend. What do you think?

Posted by Sardin > 2023-06-13 17:39 | Report Abuse

Why I believe the motorcycle market in Malaysia will remain strong in 2023:
i) the approval of additional 500,000 foreign worker to work in Malaysia in 2023
ii) FDI - new setup of factories lots of factories move out from China and relocate in SEA due to US-China trade war, this will provide more jobs and that's one of the reasons why unemployment rate in Malaysia remains low despite all the headwinds. These factories usually pay decent salary and premium branded motorcycles will be very affordable for them.
iii) Congestion in big cities in Malaysia such as KL, JB etc are getting more serious than pre-Covid time. Motorcycles will help the well paid employees to arrive at work destination faster.

Posted by Sardin > 2023-06-13 17:41 | Report Abuse

iv) parking space are limited, and is difficult to accomodate more and more cars, so that's another reason for more usage of motorcycles

Posted by Fabien _the efficient capital allocator > 2023-06-14 20:06 | Report Abuse

Hong Leong Industries Bhd (HLI) has proposed to dispose of its wholly-owned fibre cement products manufacturing subsidiary at an indicative price of RM79.5 million.

HLI said it will secure a net gain of RM12.9 million from the sale of Hume Cemboard Industries Sdn Bhd to Saint-Gobain Malaysia Sdn Bhd at the indicative price.

The final sale price will be determined later, said the group in a bourse filing, adding that the sale is expected to be completed in the second or third quarter of the financial year ending June 30, 2024.

Posted by Fabien _the efficient capital allocator > 2023-06-14 20:07 | Report Abuse

"The HLI group will continue to be involved in the manufacturing, assembling and distribution of motorcycles, scooters and related parts and
products; manufacturing and sale of ceramic tiles; and distribution and trading of marine-related products," it added

Posted by observatory > 2023-06-15 00:18 | Report Abuse

From MD&A of the annual reports, we know the fibre cement business has been struggling even before the pandemic.
However very little info has been shared. Instead of reporting the performance of each business separately, in the past the management chose to aggregate fibre cement with other businesses when providing revenue breakdown. Fibre cement was parked under industrial products up to 2019, and grouped with marine from 2020 onwards. No segmental profits/losses had been disclosed.
But during the change of grouping, it can be deduced the fibre cement revenue in 2019 was RM224m - RM46m (marine revenue) = RM177m.
Lets assume the latest annual revenue was RM200m. Given the projected disposal price was about RM79.5m, the disposal is valued at only 0.4X revenue, which is rather low (likely the business has incurred losses in recent years).

Posted by observatory > 2023-06-15 00:22 | Report Abuse

Looking at PB, item 4.2 in Appendix shows the disposal is RM20m above NAV. So it's a premium.
However, given the lack of investment (the CAPEX of the entire group has been very modest over the years), the assets would have been heavily depreciated by now. The NAV figure is not very reliable.
Based on item 1 in Appendix, we know that lands, including Kanthan land and building, have been excluded from the disposal. The 3.2m sq feet freehold industrial land at Kanthan worth some money. The net book value is RM7.19m but was last revalued in 1990. I googled and found asking price for even leasehold industrial land there is RM31 psf. So the land is unlikely to be part of the disposal which is estimated at only RM79.5m
However, item 4.2 (e) mentions RPGT associated with Kanthan Land disposal. I'm confused what the RPGT is for. Maybe another piece of land is involved? Hope HLI could clarify.

Posted by observatory > 2023-06-15 00:31 | Report Abuse

Overall I believe disposal of non-core asset is the right decision. To most investors, the only attraction of HLI is the cash generating Yamaha franchise (including Vietnam's associate), and the ~RM1.6b cash earning low interest at Hong Leong Bank (RM400m for tile factory not considered)
The disposal proceeds is about RM0.24 per share. After deducting expenses, such as the 50% retrenchment cost at PJ plant and the RPGT, the leftover could be ~ in the order of 20 sen per share.
The test for HLI Board is whether they are willing to distribute the entire cash as special dividend. Clearly with their RM1.6b cash hoarding, HLI doesn't need the money. This will be a test of HLB's corporate governance.

Posted by Sardin > 2023-06-15 19:21 | Report Abuse

Hope to receive 25 sen capital repayment.

Posted by Fabien _the efficient capital allocator > 2023-06-15 21:47 | Report Abuse

The proceeds will be placed with financial institutions pending identification of suitable
investment opportunities and expansion plans.

Posted by observatory > 2023-06-15 23:22 | Report Abuse

Unfortunately, you're right.
So there is little surprise that the share price today hardly reacted to the news.
Over RM1b has been sitting in the bank since 2019.
It has taken a long time for the Board to find suitable opportunity.
There is a huge opportunity cost involved. Cost of equity is in the order of 10% per annum.

Posted by observatory > 2023-06-15 23:23 | Report Abuse

Below calculation could show much big the gap is.
The TTM ROE is RM294m/ RM2,067m (use ending equity) = 14%
Current price to book ratio is RM8.79/ RM6.57= 1.3 time

Posted by observatory > 2023-06-15 23:26 | Report Abuse

Given HLI's stable operating and free cash flow, it could still thrive with a small dose of debt.
Hoever, for simplicity, assume it returns all of its net cash and takes zero net debt.
It will then distribute its net cash of RM1,636m to shareholders as one-off dividend.
That works out to be RM1,636m/ RM314.6m = RM5.2 per share.
(For simplicity, also ignore the RM400m tile factory investment)

Posted by observatory > 2023-06-15 23:26 | Report Abuse

The shareholder's equity is reduced to RM2,067m - RM1,636m = RM431m, or RM1.37 per share
With reduced equity, ROE will be boosted to RM294m/ RM431m = 68%!
The company could be easily valued at 5 times P/B multiple
(In fact, based on Gordon Growth Model, assume cost of equity 10%, stable ROE of 50% and a conservative 2% growth, it will be valued at 6 times PB)
With a conservative 5 times PB multiple, the share price can still fetch 5 * RM1.37 = RM6.85

Posted by observatory > 2023-06-15 23:28 | Report Abuse

Bear in mind, with all this changes, the TTM PE would have actually reduced from today 9.2 times (=RM8.59/ RM0.9347) to a lower 7.3 times (=RM6.85/ RM0.9347).
A 7 times PE company with good cash flow, zero net debt, and the knowledge that the Board is willing to return all excess cash to shareholders, is a reasonable valuation.
RM6.85 is conservative.

Posted by observatory > 2023-06-15 23:29 | Report Abuse

The total return is RM5.2 (one off dividend) + RM6.85 (revalued share price) = about RM12
A 37% upside from today closing price at RM8.79.
Such an arrangement will immediately unlock value for shareholders.

Posted by observatory > 2023-06-15 23:30 | Report Abuse

The arrangement would benefit minority shareholders, who get the RM5.2 dividend and can choose to cash out the share at a revalued fair price (assumed RM6.85 in above example).
But will this happen?
Unfortunately, no.
Why?

Posted by observatory > 2023-06-15 23:33 | Report Abuse

Because of diverging interest between minority and controlling shareholders
What is there for the controlling shareholder?
Yes, it too will get the one off dividend of RM5.2 per share, or 231m *RM5.2 = RM1.2 billion.

Whle minority shareholders will be happy with their special dividend, RM1.2 billion is a headache for controlling shareholders as it has to find another place to park its billion.
Since it sits on and controls the Board, it may as well keep the cash in the company (including the minority's shareholders' portion).
The company cash is in turn parked in Hong Leong Bank, where the controlling shareholders also owns.
It can always return the cash, partially or wholly, at a time of its choosing.
The minority shareholders get their cash only when controlling shareholder need it!

Posted by observatory > 2023-06-22 00:23 | Report Abuse

Good to see Dato Dr Jim Khor buying. This is a vote of confidence.
https://klse.i3investor.com/web/insider/detail/D_173185_2005374652

Posted by observatory > 2023-06-22 00:25 | Report Abuse

An interview with Dato Jin Khor last year.
https://www.theceomagazine.com/executive-interviews/automotive-aviation/dr-jim-khor-mun-wei/
He mentioned electric motorcycle. I believe this is going to be a game changer. Yahama could not afford to lose.
However Japanese are falling behind in EV. Japanese car producers including Toyota are trailing not only the Americans but also Chinese. This is despite Toyota was the leader in hybrid with Prius and also hydrogen powered cars.
In Vietnam both Honda and Yahama are losing market share to the electric motorcycles.
Although the electric segment in Malaysia is still small (~1%), it's fast growing.

Posted by jerry5 > 2023-06-22 04:44 | Report Abuse

Hi Sardin. Ya, it's a matter of when, not if. But likely after the upcoming state elections. Hope durian runtuh for motorbikes and our company.

Posted by jerry5 > 2023-06-22 04:49 | Report Abuse

Hi Sardin. Ya, it's a matter of when, not if. But likely after the upcoming state elections. Hope durian runtuh for motorbikes and our company.
https://orbeezhit.com/

Posted by Sardin > 2023-06-22 16:07 | Report Abuse

Hi Observatory, the controlling shareholder could just park the cash in US's bank to get 5% interest rate. Like this he can increase both the return and cash flow.

Posted by observatory > 2023-06-22 19:15 | Report Abuse

Sardin, yes he could. But he would not.
Allowing HLI to give away cash so that he could earn a temporary (what if Fed cuts interest rate?) 5% USD interest rate in his personal account, is no match for the freedom of action by controlling all the cash (including cash belongs to minority) in the company's account.
Cash, once distributed away, is difficult to get back.
But his share purchase today is encouraging. At least he sent a good signal. Though don't expect him to buy much since he's already above 75%.

Posted by observatory > 2023-06-22 22:35 | Report Abuse

Through their actions, both Dato Jim Khor and Tan Sri Quek are telling us that they believe the company is undervalued.
Among them, Dato Jim's action is more credible (given that he is not as rich as Tan Sri).
It will be even better if other management staffs and directors start buying. Will they?
However, there is still a difference between outsiders and insiders when it comes to the concept of "undervalued". Being insiders, they have the knowledge and control, and are capable to make what seems undervalued to become valaubale.
Being outsiders, we can only rely on our observations, judgement, and ultimately our trust on these insiders to deliver values.

Posted by observatory > 2023-06-22 22:46 | Report Abuse

In other words, we as shareholders should observe whether greater values are delivered, either through greater growth via higher ROE and ROIC, or greater return of cash to shareholders through higher dividends or share buybacks.