Q P Group Holdings (1412.HK)

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#1
Firstly I'd like to express my excitement about being the first person to submit too the Hong Kong companies beginning with Q Forum.  I just now need to find an HK company beginning with U in order to be the first in that forum too!


Valuation Ratios

I’ve worked out these as the valuation measures for Q P Group as of today at a price of $1.17 HK:

Dividend Yield 10%
P/B 0.78
P/C 3.14
P/E 4.67
P/S 0.49

And according to Yahoo

EV/EBITDA 2.09

These are some of the best stats I’ve found for a Hong Kong company at this time with decent share price momentum for the last 6 months (possibly some of the best I’ve seen in the world right now).  And a 10% dividend - that's crazy!  Especially in Hong Kong.

Overview

Most of my investments are in property at the moment.  With this in mind I am really excited about this company – it’s really cool and different. 

They manufacture paper products and offer printing services.  They are headquartered in Hong Kong but have 2 key production plants in China.  They’ve got 30 years track record and have customers in the US and Europe. 

Principle products: table top games, greeting cards, educational items and premium packaging.

Business Segments

They have:

1) Large business customers. (Original Equipment Manufacturers - OEM) who buy in bulk then sell products themselves through their own distribution and sales networks,  and

2) Smaller business customers. Two large customers include an international greetings cards company and an international educational toys company. 

Despite Covid, profit increased 53% this financial year (ending 31 December 2020).  The company have introduced various cost cutting measures to mitigate effects of Covid to some extent.

Revenue was only up 3.3% - but there’s good reason for this.  OEM (large business customers) sales reduced 1.4% - it actually looked a lot worse in the 1st half of the year as US and European customers were postponing orders due to Covid. But various solutions were proffered and this is actually an impressive result in light of the problems that were originally encountered. 

However, as a result of lockdowns in several territories, customers have shifted to online and digital solutions as well as reduced contact channels, for purchasing goods.  As a result, web sales have increased from $103m to $158m HKD – a 53% increase.  The Group saw a sales increase of nearly 400% on jigsaw puzzles at www.createjigsawpuzzles.com mainly from the US (obviously from people being stuck at home so purchasing jigsaws).  Importantly, active registered user accounts on all their product sites increased 37% - which in my book represents potential for returning customers.  Web sales have a higher profit margin the OEM -  hence greater profits this year despite overall revenue growth of only 3.3%. 

A long-term strategy for the business has been to grow web sales – so in fact the events of the past year may have helped this.  The group has also seen more customers in Europe this year, and will seek to diversify sales in different territories. 

The group will continue to employ more staff in the web services division in order to improve their competitive advantage and concentrate on further expansion.

US - China Trade Wars

Another really positive thing is that the company has had trouble due to it’s China based production plants and continued US/China trade conflict.  As a result, the company intends to set up a production site in Vietnam, which will produce products for the US.  This will also diversify the operational risks.

Worst Case Scenario

In my mind, the worst case scenario will be that as Covid recedes, people will reduce their purchase of products like jigsaws. But my thoughts about this are

1) As workplaces get up and running again, so the OEM sales will start picking up which will offset some of the potential reduced jigsaw and web sales.

2) As mentioned above, registered accounts are up 37% which offers potential for further direct marketing and return sales.

3) The company has had an injection of extra profit. In my experience, strong management typically make good use of the cash injection. If extra cash is invested well this could generate further growth - e.g. the company is employing more staff in web sales and seeking to diversify sales in different territories.

Web based products

Check out their cool web based product websites - love these - much more interesting the my property companies.

www.makeplayingcards.com
www.boardgamesmaker.com
www.printerstudio.com
www.createjigsawpuzzles.com

Reviews

Here are some reviews by Simply Wall Street

https://simplywall.st/stocks/hk/consumer...areholders

https://simplywall.st/stocks/hk/consumer...-that-good

https://simplywall.st/stocks/hk/consumer...us-with-si
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#2
Q P Group Dongguan factory used to perform poorly in environmental protection in year 2017. It was one of the four companies in the sector to receive red card rating. Hope it has performed better now.

Reference:
https://www.huanbao-world.com/a/zhengce/...17473.html
东莞隽思印刷有限公司 - 环保不良企业(红牌)
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#3
(12-04-2021, 10:14 AM)weii Wrote: Q P Group Dongguan factory used to perform poorly in environmental protection in year 2017. It was one of the four companies in the sector to receive red card rating. Hope it has performed better now.

Reference:
https://www.huanbao-world.com/a/zhengce/...17473.html
东莞隽思印刷有限公司 - 环保不良企业(红牌)

Very interesting.  Thanks for this! It seems to me to be near impossible to get much in-depth info on local news here in the UK so I very much appreciate that you have posted this.  In general I'm super impressed with the environmental attitude with Hong Kong companies and I get the impression that China generally is starting to make big efforts to tack environmental issues.  With this in mind what you've posted is not good news at all.  In the end it takes people complaining and making a noise about this kind of thing in order to get companies to make more effort...
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#4
Q P Group Holdings seems to be up 10% today at $1.46 HK. Not sure why it's jumped to be honest. It's up 25% since I bought now (and posted the above analysis).
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