Hiap Seng Engineering

Hiap Seng has just released its FY11 (ended 31Mar11) full-year results including a Final dividend of $0.01/share....
http://info.sgx.com/webcoranncatth.nsf/V...B002FEC64/$file/HS_FY2011_results_announcement.pdf?openelement [Results announcement]
http://info.sgx.com/webcoranncatth.nsf/V...B002FEC64/$file/HS_FY2011_News_Release.pdf?openelement [Press release]

With the sharply lower NP at $8.024m (vs. $31.491m in FY10) - and EPS having fallen to $0.0264 in FY11 (vs. $0.1037/share in FY10) - is Hiap Seng's current market cap. of $148.84m (based on 303.75m issued shares outstanding, and last done share price of $0.49) fair enough?

(25-05-2011, 06:04 PM)dydx Wrote: With the sharply lower NP at $8.024m (vs. $31.491m in FY10) - and EPS having fallen to $0.0264 in FY11 (vs. $0.1037/share in FY10) - is Hiap Seng's current market cap. of $148.84m (based on 303.75m issued shares outstanding, and last done share price of $0.49) fair enough?

If based on historical EPS, then historical PER based on $0.49 would be just 4.72x. But if we use the latest FY 2011 EPS of $0.0264, then PER jumps to 18.6x. Assuming a mid-range PER of about 8x (conservative), then Hiap Seng should be valued at about $0.21 with a market cap of $64.15 million.

Then again, we also have to account for any cyclical fluctuations in earnings which may result in either a one-off spike, or a one-off dip. Since earnings have fluctuated wildly from FY 2011 to FY 2011, taking a mid-point is perhaps being more realistic.

FY 2011 earnings = $8.024m
FY 2010 earnings = $31.491m
Average of 2 years = $19.76m or let's take $20m

EPS would then be $0.0658. Applying a PER of 8x would imply a share price of $0.526.

Therefore, it looks like it is fairly valued now.

Probably more than 2 years of data are needed.
Graham suggests taking 10 years.
Another possibility is to take either a full cycle of trough to trough or half cycle of trough to peak.
If we look at Rotary, the closest comparable, trough earnings was in 2003 - which looks like about 8 years of data.

(25-05-2011, 10:21 PM)redcorolla95 Wrote: Probably more than 2 years of data are needed.
Graham suggests taking 10 years.
Another possibility is to take either a full cycle of trough to trough or half cycle of trough to peak.
If we look at Rotary, the closest comparable, trough earnings was in 2003 - which looks like about 8 years of data.

Agreed! Mine was just a very cursory observation and back of the envelope calculation, in response to dydx's question.

Don't think I have enough interest in this company's business to undertake a 10-year analysis. Perhaps when I have a lot more time!

From the segment analysis, it is very clear that the decline of revenues and ebitda is coming from Singapore operations. I remembered vividly that the edge magazines tried to draw many investors to attention on their overseas projects which resulted in their high prices last year before they had a sudden announcement of 3qtr loss. I have learnt my lessons though. One year ago, it was clear that many local jurong island projects were tapering off and Shell project was completed. Now I understand why dydx was right after all.

Any recovery of the stock price will depend on whether Hiap Seng can clinch big projects in FY2012 or continue to stay weak and recover in 2013 or 2014. The only people who will know this would be e strategy department or Management team or people whom work as customers, suppliers. This is e risk of project based companies where there are no significant recurring income. I should revisit boustead announced projects future revenue streams.

now it seems making more sense why Rotary intends to be a global player rather than focusing Singapore only.

Should shareholders be worried about today's (2Sep11) announcement concerning CPIB's investigations into Hiap Seng's commercial contracts with some sub-contractors?.....
http://info.sgx.com/webcoranncatth.nsf/V...F003B2D37/$file/Announcement020911.pdf?openelement

The announcement mentioned that certain key management personnel in Hiap Seng have been engaged in the investigations, which actually happened in early July and mid August 2011. What surprised me most is that it appears the BOD only became aware of the investigations much later, and decided to make an announcement today.

Either the "key management" referred to in the announcent, failed to fulfill rather basic internal reporting standards or one or more Director's failed to recognise the importance of certain internal messages. Either way this is a poor show. It reflects badly on HSE's leadership.

Sigh.. Once a market darling, with being Forbes best under a billion company can actually degrade to current state.. I wonder what subtle clues that hiap seng has exhibited that can teach us a lesson to avoid these kind of counters?

Looks like I have to realize my massive loss with them..

Business Times - 03 Sep 2011

Hiap Seng: Key personnel helped in CPIB probes

(Singapore)

HIAP SENG Engineering yesterday announced that 'certain key management personnel' of the company have assisted the Corrupt Practices Investigation Bureau (CPIB) in investigations in early July and mid August this year.

Hiap Seng said in a filing to the Singapore Exchange that while the nature of the investigations is not known, its board of directors understands that the investigations mainly concern contractual arrangements between the company and certain sub-contractors relating to the provision of accommodation, meals and transport services by these sub-contractors.

The board is, however, unable to provide more information as it understands that the CPIB has requested that the details of the investigation remain confidential.

To the best of the board's knowledge, there has been no summons issued against any of the management personnel of the company, Hiap Seng added. The board will continue to keep shareholders informed of any material developments relating to the investigations as they arise.

Hiap Seng provides engineering services covering engineering, procurement and construction projects and plant maintenance services for the oil and gas, petrochemical, and pharmaceutical industries in Singapore and the region.

The company operates six fabrication yards in Singapore, Malaysia and Thailand with a total land area of almost three million square feet and a workforce of over 2,500 employees. The company also made its maiden appearance on Forbes' list of Top 200 Asia-Pacific firms with sales under US$1 billion in September 2010.

In August 2010, the company reported that net profit for the three months ended June 30, 2011 (Q1 2012) fell 68.8 per cent to $2.5 million from $8 million a year ago mainly due to a decrease in the group's revenue, an increase in the share of loss of associated companies and higher foreign exchange losses.

Revenue for Q1 2012 fell 39.8 per cent to $40.8 million from $67.9 million in the previous corresponding quarter.

Hiap Seng shares closed unchanged at 31.5 cents yesterday.