Harry's Holdings

[dydx]

Per today's (4Oct11) announcement, CEO Mohan Mulani has added a total of another 200 lots on 30Sep11 and 3Oct11, and paid $0.11/share.....
http://info.sgx.com/webcorannc.nsf/Annou...endocument
With these purchases, Mr Mulani's total interest (including his deemed interest in the shares held by his wife, Rita Mulani) in Harry's now stands at 44.6%.

[dydx]

On 5Oct11, ED Rita Mulani added 250 lots and paid $0.12/share....
http://info.sgx.com/webcorannc.nsf/Annou...endocument
Including this purchase, Mr Mulani's total interest (including his deemed interest in the shares held by his wife, Rita Mulani) in Harry's now stands at 44.86%.

[Musicwhiz]

FY 2011 results out. Not very inspiring - was surprised to see that net margin was just 0.5%, though when compared to last year's low base the increase is 190%.

A dividend of 0.22 cents/share has been declared.

Harry's last traded price was 10.5 cents/share.

(Not Vested)

[pianist]

ranked no.8 in singapore
http://www.relax.com.sg/relax/media/9398...apore.html
8. The Club by Harry's Hospitality

Located at one of Singapore's most fashionable district, the designer boutique hotel only has 22 rooms. There are two types of bedrooms - Signature and Club - that have a minimalist touch and bold yin and yang designs.

BE A TRENDSETTER: There are four F&B outlets, be spotted anyone of them depending of what makes you tick - a shot of caffeine or a glass of whiskey or cocktail.

[dzwm87]

On face value, I never reckon Harry's to have a strong growth potential. Yes, no doubt, at night there are often crowds hanging out - be it office people chilling out after work or people chilling out on the weekends. However, if you have taken a glance during the day, their pubs are very empty. This means, at any given day, their crowd at each pub will generate only around 6 hours of sales - and we have yet to consider the rate of food or alcohol turnover orders which isn't fast to be honest with.

Night entertainment outlets like St James is another fine example which will face capped or stagnant growth.

*not vested*

[RBM]

Harry's always seems to bring out the best in the buddies doesn't it!!!???!!

Seriously...... what has always attracted to me to this counter is its strong revenue generation. If I read the FY 2011 numbers correctly, Harry's revenue was S$ 47 Million last year - practically S$ 4 Million per month.

But what always dismays me and always puts me off is that Harry's only manages to eek out margins that I would charachterise as "pharmaceutical". Last year for example..... that S$ 47 Million revenue stream was "converted" into ~ S$ 220,000 net profit. Personally speaking, I believe these sorts of profit margins do not make for a sustainable successful business.

I also believe that two of the key drivers for the fullsome erosion of Harry's revenue stream are ...........
a) their managements' apparent inability to bring costs to heel - inspection of the front page of the financials shows costs up across the board..... some in the double digit %'s, and
b) a continuation of an absurd and value destructive diversification of its buisiness. Harry's market cap is still under S$ 10 Mln yet its diversification would concern a company with 100 times such market cap. This evening's later announcement of the formation of a Canadian Subsidiary served to ram home the point again.

I know I am a worn record on this. But at least - I humbly contend - I'm consistent.

Harry's share price has spent a good few months in the single cents range until the last few days. I'm betting it won't be long before its back there. Margins need to be increased, costs need to be brought to heel and the management's focus needs to be on a trimmed portfolio of bars ......... in my humble opinion.

I will be reading Harry's coming Annual Report with some interest, particularly the piece on Executive Remuneration. I'll wager that the CEO's package is by quite some margin in excess of the Company's net profit. Lets see.

Not vested. I'll go back into my box now.

FY 2011 results out. Not very inspiring - was surprised to see that net margin was just 0.5%, though when compared to last year's low base the increase is 190%.

A dividend of 0.22 cents/share has been declared.

Harry's last traded price was 10.5 cents/share.

(Not Vested)

[VestedInterest]

EPS 0.25 cents. Share price around 10 cents. PE around 40.
The Club is in the top 8 trendiest in Singapore (wished it was the top 8 most profitable though). Dividend yield 0.22/10= 2.2% (at least better than the bank's FD rates). The share price will have to fall to about 5 cents to give a PE of 20 and 2.5 cents to give a PE of 10. If dividend continues to be 0.22 cents, then at 5 cents the yield will be 4.4%, at 2.5 cents the yield will be about 8.8%. Hence it will be a better buy some where around 5 cents or lower.
Business may be hurt by competition, foreign labour restrictions, falling tourist numbers (tourist numbers are at its peak now, therefore can only move down with China possibly experiencing a slowdown), high overheads, etc. Really hope that management can pull a rabbit out of the hat. The rabbit could be a buyout, merger, alliance with an established hotel chain, etc.

[dydx]

To be meaningful, it pays to scrutinize Harry's FY11 full-year result.....
http://info.sgx.com/webcoranncatth.nsf/V...2002C1C21/$file/Harry_FY2011_Results_Final.pdf?openelement
and compare it with the 1H-FY11 result....
http://info.sgx.com/webcoranncatth.nsf/V...A003E65E4/$file/Harry_Results_Announcement_1H2011.pdf?openelement

2H's revenue at $24.267m is $1.567m (or 6.9%) higher than 1H's at $22.7m, and Harry's actually registered a profit turnaround in 2H - with a NP of $643k, vs. a net loss of $408k (revised to a smallish NP of $18k, if we exclude a $426k charge on IPO costs) in 1H. So there is evidence that the business and profitability are improving. We should also note that as at 31Dec11, Harry's at group level was in a net cash position to the tune of approx. $4.3m.

[dydx]

1H (ended 30Jun12)-FY12 results released last Friday (3Aug12) makes interesting reading.....
http://info.sgx.com/webcoranncatth.nsf/V...F0033CDF9/$file/Harry_Results_Annoucement.pdf?openelement

Harry's revenue stagnanted in the 1H mainly due to the closure of 3 non-performing bar outlets, and a small fall in revenue of "The Club" boutique hotel. A small PBT of $75k - a reversal from a pretax loss of ($408k) in 1H-FY11, which was after accounting for $425k in IPO expenses - was recorded, and this is after taking a total of $165k in property/equipment write-offs and losses on disposal of property/equipment. Harry's generated approx. $2.0m in pretax FCF before working capital changes, and the FCF has been applied to partially reduce bank borrowings, with the remaining spent on $248m in net capex and added to net cash reserve, which stood at approx. $5.3m or equivalent to approx. $0.056/share as at 30Jun12. Harry's NAV as at 30Jun12 stood at $14.75m or equivalent to $0.1553/share (based on the 95.0m o/s issued shares).

At the last done share price of $0.12 (3Aug12), Harry's market cap. stood at only $11.4m. Against Harry's current annual revenue base of at least $45.0m and pretax FCF of approx. $4.0m, it appears Mr Market is not working hard enougha at all on this quite well-established business still capable of generating a decent FCF.

[RBM]

Thank you for this assessment of Harry's 1H 2012 results dydx,

Although I'm not currently vested in Harry's, I find this company and its results & background fascinating. Other buddies must think likewise .........because it probably has more VB forum column inches per S$ of market cap than any other currently listed Singapore counter! Although Foreland Fabritech, with its recent precipitous drop in share price, will likely now be giving Harry's some vigorous competition on this score!

I actually believe it is a good thing that Harry's management has started to cull their non-performing outlets - clearly there is a highly variable performance of their various bars (I observe this thru personally conducted "site visits"). It is pleasing that Harry's H1 statement refers to the "......commencement of the rationalization of non-performing outlets", i.e. there is more to come (ref. commentary in Point 10 on Page 10). I wish they would also withdraw from some of their peripheral "side-businesses" as well.

I also see from the numbers that there are clear and encouragingly successful efforts being made by Harry's leadership aimed at operating cost reductions, and not just by closing outlets. Harry's razor-thin margins are currently not robust and anything that can be done to boost margins can be only be positive. And lets not forget that CEO Muliani sometimes dips into the market to edge up his Harry's shareholding, as he dis most recently in May.

I buy the arguments about Harry's FCF generation and the sheer dimension of its ~ S$ 4 Million per month revenue base. But, candidly stated, I believe it is correct that Harry's share price continues to trade at a discount to its ~ S$ 0.155 unit NAV while Management maintains its crazy business diversification & fragmentation, and its margins remain so very thin.

Not currently vested .............. but monitoring.

1H (ended 30Jun12)-FY12 results released last Friday (3Aug12) makes interesting reading.....
http://info.sgx.com/webcoranncatth.nsf/V...F0033CDF9/$file/Harry_Results_Annoucement.pdf?openelement

Harry's revenue stagnanted in the 1H mainly due to the closure of 3 non-performing bar outlets, and a small fall in revenue of "The Club" boutique hotel. A small PBT of $75k - a reversal from a pretax loss of ($408k) in 1H-FY11, which was after accounting for $425k in IPO expenses - was recorded, and this is after taking a total of $165k in property/equipment write-offs and losses on disposal of property/equipment. Harry's generated approx. $2.0m in pretax FCF before working capital changes, and the FCF has been applied to partially reduce bank borrowings, with the remaining spent on $248m in net capex and added to net cash reserve, which stood at approx. $5.3m or equivalent to approx. $0.056/share as at 30Jun12. Harry's NAV as at 30Jun12 stood at $14.75m or equivalent to $0.1553/share (based on the 95.0m o/s issued shares).

At the last done share price of $0.12 (3Aug12), Harry's market cap. stood at only $11.4m. Against Harry's current annual revenue base of at least $45.0m and pretax FCF of approx. $4.0m, it appears Mr Market is not working hard enougha at all on this quite well-established business still capable of generating a decent FCF.