Thursday, March 10, 2016

HUPSENG 5024 SELL @ 10/03/2016

HUPSENG 5024 SELL @ 10/03/2016

HupSeng is it worth to hold now?
Recent result achieve highest profit in history and bring the share price to historical high as well. But is it substainable? 

You may need to read out the interview article below from HupSeng Management

According to management, recent better result is due to lower commodity price and weaker Ringgit Malaysia, which help to registered higher profit margin at average 18%.
However if all these two external factor back to normal and expecting by management. The profit margin shall be back to average 13%., which is 27.8% downward from current earning.
The 13% profit margin is based on the external factor, CPO price at RM2800 per ton and RM3.80/USD, which is highly possible.
  • Current share price, RM1.30
  • PE = 19, which is high
  • DY = 5.7%, which is above average but it is not committed by management and is not substainable, as dividend payout is higher than earning.
Future prospect 
  • New product launching, "Naturelle" brand biscuit. I have tasted it and it is not my cup of tea.
  • Cash reservation at 4Q15 = RM120 million
  • New production line will be implemented and will cost around RM26 million
  • Purchased new factory and land at cost RM17.5 million on March 2016.

My personal view
  1. Share price now is high, based on PE ratio
  2. Management informed that the profit will be back to normal if commodity price and currency back to normal, which i think is highly possible. 
  3. There will be a risk of poorer result for next few quarters.
  4. Constant dividend payout is a BIG question mark, as management didn't commit any dividend policy.
  5. No timeline for new production line and new factory.
  6. Management is not agreesive to develope new product.
  7. Saturated "Cream-Cracker" market with annual growth 2% to 4% only.

Target Price 
  • Buy at RM0.50, without consider dividend yield or,
  • Buy at RM0.97, if dividend is able to maintain, which can give a DY at 7% (BEWARE! It is not achievable in long term)

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Please note that all data given are merely blogger's opinion. It is strongly recommended that you do your own analysis and research before investing.