Hock Lian Seng

[weijian]

Hi weijian,

It’s all good. Everyone is entitled to their own methodology and views, which is what makes a market. I was trying to understand your approach because it sounds like you are thinking that there is some way to go to meet that excess capital for distributing a special dividend to shareholders, whereas I feel that the company is on the cusp of doing it.

But I believe both of us agree that the company is well capitalised and it’s a matter of time.

hi Squirrel,

Indeed, it is diversion of views that makes me excited (and probably you too). I am not really interested in hearing my own echo chamber.

Folks like you and ksir have demonstrated that it is well capitalized, and so I have not dwelled more into something that is obvious. I do not have a call on WHEN it will happen but my studies are focused on HOW, so that I maybe able to have a better understanding on the WHEN.

As astute VBs had pointed out in the past in this thread, it is about following the sales of its Shine@TuasSouth units and also the amount of activity evident on the ground with the new Tuas Mega Port churning (It probably can't be too bad because its remaining units are almost 100% rented out).

Of course, all these studies may not matter too. But that's what makes a market

[¯|_(ツ)_/¯]

hls@33

Great analysis.

May be the next step is to take some action?

Hope you enjoy and had a great journey - just like me 

Gratitude!


For those who don't know AK71, take a look and you might like him (his analysis):
TIPS: for valuebuddies who is impatient, start watching at 2:30 

[weijian]

From what it has revealed publicly, Towkay Chua may be adverse to new residential/industrial property investments. The post-covid Great Construction Boom of 2023/beyond is upon their doorstep and so, are they holding onto their cash for working capital/bidding capacity?

RESPONSES TO QUERIES FROM SECURITIES INVESTORS ASSOCIATION (SINGAPORE) ON THE ANNUAL GENERAL MEETING (“AGM”) TO BE HELD ON 24 APRIL 2024

Would it be reasonable to assume that the group is overcapitalised given the scale of its current operations?

The Board does not hold the view that the Group is overcapitalised or its financial resources are not deployed to maximum returns. One of our key competitive strengths is our strong financial liquidity, it has allowed the Group to achieve lower cost structure and headroom to increase order books.

Both civil engineering and property development businesses are capital intensive in nature. As the Group continue to bid for new infrastructure projects in the public sector, the Group must maintain liquidity (financial resources) to undertake successful bids. The Group has undertaken projects with contract value of above $500 million with execution period more than 5 years.

SIAS Q&A
https://links.sgx.com/FileOpen/Responses...eID=797097

[ksir]

From what it has revealed publicly, Towkay Chua may be adverse to new residential/industrial property investments. The post-covid Great Construction Boom of 2023/beyond is upon their doorstep and so, are they holding onto their cash for working capital/bidding capacity?

RESPONSES TO QUERIES FROM SECURITIES INVESTORS ASSOCIATION (SINGAPORE) ON THE ANNUAL GENERAL MEETING (“AGM”) TO BE HELD ON 24 APRIL 2024

Would it be reasonable to assume that the group is overcapitalised given the scale of its current operations?

The Board does not hold the view that the Group is overcapitalised or its financial resources are not deployed to maximum returns. One of our key competitive strengths is our strong financial liquidity, it has allowed the Group to achieve lower cost structure and headroom to increase order books.

Both civil engineering and property development businesses are capital intensive in nature. As the Group continue to bid for new infrastructure projects in the public sector, the Group must maintain liquidity (financial resources) to undertake successful bids. The Group has undertaken projects with contract value of above $500 million with execution period more than 5 years.

SIAS Q&A
https://links.sgx.com/FileOpen/Responses...eID=797097

Very conservative indeed.
Tons of warchest idling in SG listed companies. 
I reckon partly the reason why this market is unloved haha but also why value investment works here!
Towkays have shown the ways with their low-ball privatizations (why we not taking the cue? haha)

Outside investors looking at STI index and see a very very stagnant index over past 15+ years.
But, the fat fishes are not there in STI index right? 
How many STI index companies get delisted? Close to zero? 

Back to topic, I don't think having tons of net cash is a pre-requisite to successful bidding for Gov projects. 
Otherwise Yongnam wouldn't have won projects with their crazy high debts back then (quite obvious for any Finance folks looking at their book).  

But of course this could be the "shadow" of 1998 liquidity crisis. Similar to what Munger said about Ben Graham still living in shadow of his Great Depression experience.

[weijian]

@ksir,

Besides "tons of warchest", don't forget the "tons of real estate" too We throw stones at Towkay's lowball offers. But surely we love to buy bargains ourselves, don't we? Of course, if we are on the other side of the trade, we have to throw stones.

As for STI components' delisting, with the exceptions of a few (eg. YZJSB and Venture), most of the components are majority owned by either Ah Gong or Godfathers. The last STI component stock to get a (high ball) offer was GLP, iirc. While we can't look forward to any-kind-of-offer for STI components, but I do think there are opportunities wrt to restructurings from Ah Gong/Godfathers. Ditto Keppel Corp.

As for Yongnam, while I have no insight but my guess is that high debt is a result of borrowing cash to fund its project winnings. So it probably had a lot of (borrowed) "cash" to show when it submitted its tenders. But moving on, I am quite sure that LTA and other gov entities will minimize any sort of contractor defaults, which then translates to delays. When you open an MRT line with 10 stations, completing 9 of them ahead of time is meaningless if 1 of them gets delayed.

[Squirrel]

Did anyone attend the AGM today? I couldn't make it. Would be really grateful if anyone that had attended it could let us know what transpired?

[weijian]

MINUTES OF ANNUAL GENERAL MEETING

Mr Lim Hock Chuan (“Mr Lim”) highlighted the improvement in cash and cash equivalents from S$94.4 million in FY2018 to S$132.4 million in FY2023, and enquired about the Company’s plan with the cash reserves and suggested to have higher dividend payout to shareholders.

Mr Chua Leong Hai (“Mr Chua”) explained the challenges (rising manpower and material costs and stringent regulations imposed by relevant authorities, especially those restricting the employment of foreign manpower) and tight profit margins due to competitive bidding. Further, the dollar value of projects undertaken by the Group has increased significantly in recent years. For these reasons, the Group relied on its internal financial resources to meet working capital needs. Should the Group incur borrowing cost, profit margin will be eroded.

Mr Chua noted the feedback from shareholders for a higher dividend payout. As a substantial shareholder, he would benefit from this. However, any payout was subject to financial performance, working capital needs and capital or investment commitments.

https://links.sgx.com/FileOpen/Minutes%2...eID=803800

[weijian]

Things are looking up for HLS's Shine@Tuas South as JTC's 2Q24 report continues to show healthy mid/high single digit YoY increases in price and rental indexes, which is similar to FY23.

Looking at the caveats lodged for Shine@Tuas South YTD:
Jan-July2023: 11 units (full year 24 units)
Jan-July2024: 17 units
(Total 179units, with ~110units unsold as end FY23)

While there seems to be some way from selling out, but it seems probable that sales are on track to exceed FY23 sales, or at least match to it.

SINGAPORE INDUSTRIAL PROPERTIES As at Second Quarter 2024

In 2Q 2024, the increase in rental index of all industrial space slowed to 1.0% compared to the previous quarter and 6.6% compared to the previous year, moderating from the quarter-on-quarter increase of 1.7% and year-on-year increase of 7.8% in 1Q 2024. This is the slowest rate of increase since 1Q 2022, following Singapore’s Covid-pandemic recovery. Meanwhile, the price index of all industrial space rose by 1.2% compared to the previous quarter. Compared to the previous year, the price index increase of all industrial space slowed to 3.0% compared to the year-on-year increase of 3.3% in 1Q 2024.

https://stats.jtc.gov.sg/content/static/...2024Q2.pdf

[Squirrel]

It has been a while, but I have finally gotten down to writing another piece. And this time the focus is on Hock Lian Seng Group!

The Group has released results yesterday, and it all looks rather prudent and promising at the same time. Hock Lian Seng has been continuously profitable since it was listed on the SGX in 2009, and that includes during the covid period! So I believe prudent is the right word to use.

With a market capitalisation at S$138m (S$0.27 per share), the company holds S$132m and that balance is expected to continue to rise. Would a special dividend be in store for FY2024? In the meantime, I am going to enjoy the 1.5 cents per share dividend that was announced which gives it a 5.6% dividend yield.

https://www.thesquirrelsdrey.com/post/ho...value-trap

https://links.sgx.com/FileOpen/Unaudited...eID=787328

The Cash balances and investment securities have risen again to $156m and $38m, which altogether eclipses the current market cap of the company at $166m ($0.325 per share at time of posting). Since the last post, I have received 1.5c per share in dividends for FY2023 distribution.

Given that for 1H alone, the earnings is 3.98c per share, and development properties balance is $54m and given the results, seem to be held on the books at a 40-50% discount, how much cash balance would one expect at end of FY2024? Is this time to reward shareholders with a special dividend?

https://links.sgx.com/FileOpen/Financial...eID=814570

[money]

HLS is the only construction company in my portfolio. If you look across the industry, i seriously struggle to find another company with a strong balance sheet, with so much cash, with a decent dividend yield. Its steadily increasing net profits in the past few years due to the sale of its industrial properties makes it really attractive. What if it continues to unload all its industrial properties at the current margins? it is scary to think about it