CGS International (CGSI) analyst William Tng highlights Haw Par Corp’s steady growth and strong net cash position in his July 10 unrated report.
Haw Par is an established Singapore multinational group, listed on the SIngapore Exchange since 1969. It comprises three operating businesses — a healthcare business that owns the Tiger Balm brand with a wide range of products sold in more than 100 countries; a leisure segment consisting of Underwater World Pattaya; and a property segment.
The group also receives dividend income from its portfolio of UOB and UOL shares.
The analyst notes that Haw Par has experienced growth from its healthcare business over FY2020-FY2023.
Following disruptions from the Covid-19 pandemic, the group’s healthcare business revenue and operating profit experienced a sharp drop from $224 million and $74.8 million in FY2019 to $93 million and $16.2 million in FY2020, respectively.
However, FY2023 saw a rebound with its healthcare business revenue and operating profit recovering to $213.5 million and $64.9 million respectively.
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Currently, Haw Par’s healthcare business accounts 92% and 87% of its FY2023 revenue and operating profit respectively, making it the group’s key revenue and operating profit generator.
Additionally, Tng notes that, as at end-2023, the group is in a net cash position of $3.31 per share, based on cash and treasuring bills, with the exclusion of its portfolio of UOB and UOL shares.
“Haw Par’s equity position at end-2023 was $3.47 billion which comprises share capital ($268.9 million, 7.7% of equity) and reserves ($3.2 billion, 92.3% of equity),” adds the analyst.
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According to management, Haw Par’s new healthcare manufacturing facility located at the I-Park at Senai Airport City in Johor, Malaysia, has recently obtained a Good Manufacturing Practice (GMP) licence as at October 2023.
The new plant’s commercial supply of its products is set to commence in 2025.
Moving forward, Tng adds that with capital expenditure needs reduced with the completion of the new plant, management believes that its net cash balance of $732 million as at end-2023 will provide headroom for strategic merger and acquisition opportunities.
Based on its closing price of $10.04 as at July 9, Haw Par currently trades at a historical FY2023 P/E of 10.3 times and a P/BV of 0.64 times.
The group has paid both interim and final dividends in the past five years, with a “stable” dividend per share (DPS) of 30 cents for FY2019-FY2022. This has since been raised to 40 cents for FY2023.
As at 12.10pm, shares in Haw Par Corporation H02 are trading at 2.7 cents higher or 2.68% up at $10.36.
