............................................................... HUP SENG INDUSTRIES BERHAD Value Evaluation
Ever tried HupSeng’s Ping Pong biscuit together with a hot chocolate drink? It’s truly a classic combination and this is how I get to know the brand which I believe is one of the Malaysia’s all-time favourite crackers! Hup Seng has been manufacturing all sorts of cookies, biscuits and crackers for decades. As a repetitive winner of numerous consumer products, it is obvious that HupSeng possess a strong foundation of branding and popular product mixes which ensures the position of HupSeng in the market. As recipes of most products are well produced, the firm spends not much on capital purchase or even research and development (averaging to RM6-8 million annually), thus the firm accumulates a lot of cash which is able to finance any further expansion and acquisition in the future. As 87% of the company’s total revenue is generated from Malaysia, we can see that there is still a lot of opportunities for HupSeng to grab in the future with such a strong cash flow position.
With the current market flooding with all sorts of products, the competition has become stiffer than ever. This also includes competition especially from China with low price advantage who wants pieces of the market pie. Also, raising of utility rates and fuel costs put a heavy burden on the industry as a whole. Furthermore, taste and preference changes accordingly to regions. Although there are overseas opportunities, it is a difficult mission to satisfy all kind of consumers’ need.
Looking into the company operating cash flows, it manage to climb amid of fluctuation during the initial years. Both ratios are also performing splendidly as shown in the table. The company did not go for further leveraging for the past ten years which proves that the company is able to gradually sustain on its own without much gearing which reduce a lot of risk at the same time. With my calculation of RM4.13 intrinsic value after 10% margin of safety, the price now is well above its value.
Hup Seng may rally after closing at its highest in more than a week. Traders may buy if it closes above MYR1.20, with a close below MYR1.13 as a stop-loss. Should the MYR1.25 resistance level be broken, the price target will be MYR1.40. However, failure to get above MYR1.20 will likely see the stock trading lower, and downside risk will increase if the stop-loss is triggered.
Rat211, too many counters to control............more than 20, already used up around RM1 million, not much bullets left...........still holding 50,000 shares in Hup Seng n will top up only when I sold some of my other profit making counters.
Yes rat211, I'm a full time investor for more than 10 years but has been actively involved in share market for about 50 years...........since my working days.
Well rat211, long term counters r Maybank, Cimb, Axiata, Telecom, Pwroot, Uems, Msniaga, DRBHICOM, Iris, Hup Seng, OSK Holdings n Berjaya Sports Toto n mid n short terms counters r Iris wa n wb, Insas, SCH, KNM, Luster, Luster warrants, Flonic, PMcorp, Berjaya Corp, Olympia, Utusan Melayu........
Kenneth89, I even dare not to average down as I bought the shares during the high prices. I better use my fund for other fast moving stocks. I'm waiting to sell all my rojak counters as newman called them when they reach a certain level..........minimal profit or loss.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
Duitlai
307 posts
Posted by Duitlai > 2014-04-19 16:50 | Report Abuse
The one next to Hupseng (Yongtai bhd)is warming up
having the same modus of opperani,Watch out.
Another BATU PAHAT counter