On 11 August 2015, Haw Par delivered a good set of 2Q 2015 performance. Profits for the period was $115.877 million and the 6 month period was S$129.33 million, representing an increase of 88% and 75% increase compared to 2014 results. On the surface, this might seem like an impressive showing by Haw Par. However, upon closer scrutiny, the profits was actually bolstered by the S$55.8 million gain arising from the partial disposal and reclassification of one of its assets, Hua Han.
In terms of operating cash flow, the 2nd quarter saw a healthy cash flow of $48.3 million due to the investment income of $38.6 million. As I have touched in my previous article on Haw Par, the company has substantial investments, consisting mainly of strategic holdings in United Overseas Bank Limited, UOL Group Limited and United Industrial Corporation Limited. This investment portfolio provides a stable source of funding – through recurring dividend income – and financial strength – at marked-to-market valuations – over the years.
Is Haw Par an undervalued stock and thus merits investment from wealth builders? After all, it is currently trading at $8.240, well below its Net Asset Value of $12.93. However, it should be noted that the company currently holds about S$2 billion worth of shares in UOB, UOL and UIC. So what this means is that any major stock market correction will see the company’s value been affected correspondingly. On the other hand, a bullish stock market will push the value of Haw Par due to the increased value of its stock assets. This explained why Haw Par has rocketed 100% since 2011 to reach a peak of $9.240 in June this year.
What I like about Haw Par is its [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]
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