Hanwell Holdings (formerly: PSC Holdings)

Hi All,

Our lucky break on Hanwell documented here in our thoughts for building a Graham type portfolio.

https://weightedresearch.substack.com/p/...-portfolio

Enjoy reading.

Hi All

We had bought $Hanwell(DM0.SI) at an average price of SGD 0.23 and is totally out @ SGD 0.335 over a 2 years period.

We had moved the proceeds into $Tat Seng Pkg(T12.SI). We had given up hope that the Hanwell BOD will do any value enhancing moves or on a possible takeover from Sam Goi...

Tat Seng management had indicated they may list Tat Seng operation in China. With elevated packaging demand and elevated prices, the listing will be momentous for Tat Seng.

If Sam Goi did an activist on Hanwell, Tat Seng share price will react as well. So we are changing the horse to bet now. From consumer brands in Singapore and Malaysia to Packaging Materials in Singapore and China. From the investment holding company to the subsidiary.

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Hanwell is very likely to do reasonably well financially, the movement control order in Msia is not a significant event. It will negatively affect it but not much. The positives outweigh the negatives in the foreseeable future. Still deeply undervalued. For a profitable company holding well known brands, it should not be trading below NAV or very low PE. May remain under valued for the longest time w/o a catalyst. That's the way it is. If I had spare funds I would be an aggressive buyer @ current prices even though it may trade back to 20-30ct levels again.

Onto Sam goi, besides deep pockets, Sam Goi has patience, lots of it. It is very very likely that value will be unlocked over time, but not sure when and not many have the patience to wait it out.

On Tat Seng, a good company dealing in a commodity type business. The problem with Tat Seng is its liquidity and share float. It is impossible for a fund or individual to start accumulate a significant amount of shares within a short period w/o pushing the price up too much. Too many shares are closely held, too little shares available, extremely difficult to accumulate.

A separate listing for Tat Seng's big and growing PRC division - operating in a huge domestic market - to raise some new capital to hasten growth is not a bid idea. A partial sale of the PRC division to 51% during or after its IPO will also bring in a nice gain and tonnes of cash, which should lead to Tat Seng paying out one or more nice special dividends. An eventual divestment of the entire PRC division will bring a huge gain and a mountain of cash, which will probably lead to a major capital reduction and distribution to Tat Seng's shareholders.

Of course, along the way Hanwell could well divest its entire controlling interest in Tat Seng, and the proceeds go to rewarding shareholders.

I generally believe that investors should do their own independent work before investing, instead of following what the whales are buying/selling.

However, Sam Goi is one of the few exceptions of Asian investors that I think is worth tracking. Some of his investments are good value picks (e.g. Serial System, Sunningdale, Hanwell, Mewah etc).

Patience is a virtue in investing, and is often a rewarded behavior, given how most investors are impatient (rotating or jumping from one investment to the other, treating them like pieces of paper instead of ownership stakes). So I think it's worthwhile to be as patient as Sam Goi is, at least in relation to Hanwell.

The problem with Hanwell is the capital allocation. ROE had remained very low due to the excess cash on its balance sheet. The low ROE will ensure that valuation stays close to NAV and the holding of Tat Seng as an investment will ensure that conglomerate discount will exist. Unless there is changes in the above, any upside should be limited.

We got into Hanwell as we detected a change in the management language in term of capital allocation. But other than the capital reduction exercise done 2 years ago, we remain quite disappointed with the lack of activity. We had spoken to the directors during 2019 AGM, but they seem to be happy for things to be where they are. A spinoff of Tat Seng is not on the cards and sale of Tat Seng is the likeliest scenario then.

Totally agree that Sam Goi will most likely be able to do some value unlocking over the next few years but he seems to be navigating slowly through the boardroom.

Other than the percentage return, the time for the investment to be realise is important as well. ROI can be decent but IRR may be really poor...

Tat Seng potential listing their China operation will help to propel growth and possibly a good dividend upon listing. On a risk reward ratio, we would rather be in a subsidiary company which has some tailwind, growing rapidly and trying to create value than at the conglomerate level which is happy where they are.

And totally agree it is incredibly hard to accumulate Tat Seng and thus our position in Tat Seng is really small. Overall we do not want to make the same mistake we had done with Hanwell when we had a large position and find that we have a hard time exiting when we want to (recycle capital).

Hanwell price went up by 4 cents since we sold and maybe we will be regretting our decision in the near future.

Mr. Goi was officially appointed as Non-Executive Chairman and Non-Independent Director of the Company on 8 March 2021, hope he will not be richly paid as Allan. Hanwell's share price has appreciated from about 27 cts to the high of 44 cts yesterday but still below its NTA, is something brewing or the market starts to value the coy whilst Popiah King continues his relentless buying of shares?

(02-03-2021, 12:14 PM)Corgitator Wrote: I generally believe that investors should do their own independent work before investing, instead of following what the whales are buying/selling.

However, Sam Goi is one of the few exceptions of Asian investors that I think is worth tracking. Some of his investments are good value picks (e.g. Serial System, Sunningdale, Hanwell, Mewah etc).

Patience is a virtue in investing, and is often a rewarded behavior, given how most investors are impatient (rotating or jumping from one investment to the other, treating them like pieces of paper instead of ownership stakes). So I think it's worthwhile to be as patient as Sam Goi is, at least in relation to Hanwell.

Sam Goi has a preference for food processors/related, which have done very over the past year. Ditto for Mewah (and JB Food), which faced margin pressure for many years. Serial is probably a lost cause by now.

As the pandemic situation continues to improve, the 'return to normal' about a year or so from now will probably mean that the margins of food processors should also go back to being pressured.

Tat Seng is also interesting because it was once thought to be uncompetitive compared to the bigger players, and very capital intensive. But the boom in China e-commerce has allowed its profit (and share price) to grow, in spite of its weaknesses.

Nevertheless, I think this (and many other stocks) is a good example that even companies which are poorly managed, of poor reputation, or businesses with poor economics, can still have their day in the sun when they are lucky.

This should give hope to value investors still looking for cigar butts, or cheap stocks, as measured through traditional (p/e, p/b) means.

This maybe the catalyst to unlock value. (See post 29-09-2020, 01:56 AM & 01-03-2021, 03:15 PM) With the former chairman and wife getting out of the picture, seems at least a few deep pocket bosses are interested in this Hanwell, and rightly so. Getting established brands and a highly profitable packaging business at a discount to NAV is good thinking from a business perspective.

What I do know is the value will be unlocked over time, what I do not know is when and how the business dynamics would change during this period of waiting. But being consumer staples, it is very unlikely that it would bleed too much even if there is some degree of mis-management.