Hong Leong Finance

[pianist]

just read nephew of mr kwek was the one in the porsche mishap this morning...

[butcher]

Hong Leong Finance ("HLF") have announced its annual report and its letter to shareholders:-

http://infopub.sgx.com/FileOpen/HLF%20AR...eID=395596

http://infopub.sgx.com/FileOpen/HLF%20AR...eID=395597

Its letter to shareholders uploaded seems to be from a Ms Word document with tracked changes seen. Looks unsightly

[butcher]

Just wondering if HLF have any ATM machines?

HLF have the size and financial capability to become a full fledged bank instead right? Just curious to know if it will apply to become one.

[BlueKelah]

Just wondering if HLF have any ATM machines?

HLF have the size and financial capability to become a full fledged bank instead right?  Just curious to know if it will apply to become one.

Hong Leong is already a bank in malaysia lah, like CIMB bank, owned by the Quek family, who also own Guocoland. Should be no issue for them if they intend to trade as a bank in SG. 

Probably easier for their purposes not to be classified as a bank, which would probably be more troublesome as they will have to conform to more government oversight and requirements...

they have been around in singapore for 50 years liao and not registered as a bank yet so i think probably it will not apply to become one lol..

[thor666]

Just wondering if HLF have any ATM machines?

HLF have the size and financial capability to become a full fledged bank instead right? Just curious to know if it will apply to become one.

I think there is an implicit requirement for consumer banks to do "national service" as part of the application.

Considering that sg is a small market, i doubt hl are interested after so long.

Sent from my LG-H818 using Tapatalk

[cfa]

Unlikely MAS will issue another banking licence .

[LionFlyer]

Getting QFB for retail operations isn't hard now that MAS had liberalized it. But as thor666 alluded to, the ROI may not be there given our saturated market.

HLF already occupy a established niche, so unless there is something compelling, I don't see them trying to chase a different type of business.

[specuvestor]

Hong Leong Finance ("HLF") have announced its annual report and its letter to shareholders:-

http://infopub.sgx.com/FileOpen/HLF%20AR...eID=395596

http://infopub.sgx.com/FileOpen/HLF%20AR...eID=395597

Its letter to shareholders uploaded seems to be from a Ms Word document with tracked changes seen.  Looks unsightly

It's supposed to be like that to show u the changes to the constitution.

[tanjm]

I just recently took an interest. Has anyone taken a look recently?

Seems to me that HLF is a pretty simple business. It acts mostly as a pure financial intermediary - take deposits, give loans. Its NPL has always been quite low (save the GFC), with a 2015 NPL of 0.7% of which 0.6% was based on secured loans, and its trading at a big discount to NAV - the NAV being backed by loans and deposits. Its net interest margin (NIM) in 2014, and 2015 is a stable 1.3%.

An interest rate spread rise between short term and long term rates of 0.5% would move its profit margins significantly over the medium term. I note that >50% of its loans are >3yrs duration, so that a change in long term rates would fairly quickly hit its bottom line (i.e. you make new loans at the new rates).

Last, its last 5 years dividend is between 10-12 cents with a current price of 2.2.

There is one potential significant risk that I can see from a fairly brief examination. Property related loans make up 82% of its portfolio, albeit mostly secured. A big property downturn would probably hit its NPL quite significantly, but I believe its GFC NPL was in the region of 3%? From what I can see, every 1% increase in NPL would decrease its accounting P&L by about 3 cents (its current profits are 16 cents).

Its trading liquidity on SGX seems very low, so people who don't like that (can't get in/out quickly) should prob stay away.

[YMPL]

The banking sector is one of my focus sectors. Instead of looking at only PB and NPL, I suggest a more comprehensive view.

HLF's ROE is about 4%. A P/B of 0.6 means an expected yield of 6-7%. I would say, a fair priced based on your description, with low NPL, and simple business model.

HLF is small comparing with major banks e.g. DBS. HLF's total asset is about 3% of DBS's. Size matter for the banking sector. We can see from the cost-to-income ratio of 52% for HLF, vs. DBS's 42%. It might be the reason for lower ROE. It will become more matter in near future, due to higher compliance and regulatory costs. Economic-of-scale is one of the solutions IMHO.

All comments are welcomed.