Haw Par Corporation

[freedom]

in Haw Par annual report, it is stated.

[EnSabahNur]

Using multiple pyramid structures allows Wee Cho Yaw to minimize the capital locked up while still keeping control of his empire.

How does he minimise the capital locked up by using a pyramid structure?
Is it because he can wield control over a company A (without owning all shares of company A) and use Company A's shareholding of UOB to cast votes that he favours?

[d.o.g.]

Is it because he can wield control over a company A (without owning all shares of company A) and use Company A's shareholding of UOB to cast votes that he favours?

Bingo. For example, take UOB. The Wee family directly owns 17.37% of UOB. That would imply they don't control UOB. But there is 4.68% of UOB held by Haw Par. The Wee family owns 30.6% of Haw Par which allows them to control Haw Par and thus vote the UOB shares held by Haw Par. The total UOB shares held are then 22.05% of UOB which suffice to grant the Wees control of UOB.

[D123]

Most of the value stems from the 4% stake in UOB. Full value will never be realized since Wee Cho Yaw needs it to keep control of UOB. Using multiple pyramid structures allows Wee Cho Yaw to minimize the capital locked up while still keeping control of his empire.

Try building a web of the Wee empire and the respective shareholdings. It's quite enlightening, and you can quickly see what the key companies are.

Okay, this is coming a little late, but thanks for pointing that out.

_____________________________________________________________

Ever since the original post, I have largely left the Wee empire on the back burner, after finding out their cross-shareholdings and the web that the family has built to keep their companies under influence.

Along the way, I also found a few companies that had similar structures: the Wing Tai companies (Wing Tai Holdings [SGX], Wing Tai Properties [HKSE] and Wing Tai Malaysia [Bursa]), Far East (Orchard Parade Holdings, Yeo Hiap Seng), Kuok Group (Malaysia, Kerry [HK], Allgreen [SG]). They might have more under their web of influence; I just didn't go to the trouble of uncovering them. I was actually looking at some property counters when I found out about these.

Personally, I would prefer to avoid such companies, where the majority shareholder is using the company to manage his own wealth. There are just too many incentives for the key owner-managers to settle for a surer 10% ROE rather than working harder for a riskier 20% ROE.

It's a subjective point, but worth considering, even if you draw different conclusions. Anyone actually found any plus points of such empires?

[d.o.g.]

Anyone actually found any plus points of such empires?

1. The holding companies often trade at a discount to the implied value of their assets. If you can hedge, you can obtain exposure to assets for free e.g. long Haw Par, short UOB & UOL, and you can get the cash, real estate, Hua Han etc for free.

2. Sometimes the cash cow in the empire is listed separately and the parent company has a heavy debt load. In such a case the cash cow company will have a very high payout ratio as the cash is needed to prop up the parent company. Buying the cash cow company ensures an alignment of interest with the ultimate shareholder - dividends will be paid as often as possible.

[freedom]

wonder when he dies, can the wee empire continue to exist and control UOB?

Of course they can. His son Wee Ee Cheong is already the current CEO.

You can rest assured the Wees and the Queks will ensure their empires will never fall into the hands of outsiders.

Divide and conquer.

Will WCY pass everything to WEC only, not to any of his other sons? If you look at the cross-holdings carefully, only WCY can exercise absolute control over the Wee empire, not any of his sons.

over generations, the family bond will fade. Will the wee empire continue?

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does the holding of UOB consider asset to the Haw Par minority shareholders? it does not generate any cash flow (no dividend, all dividend were scrip). I believe, so long as Haw Par does not have serious cash flow difficulty and UOB continues to adopt scrip dividend, Haw Par will always choose scrip over cash dividend.

But what if Haw Par would have some problems with its cash flow? Will it shake the wee empire?

[orang]

It will be a cold day in hell if Haw Par face a cashflow problem.

For one thing it is the family investment vehicle. Another is the bulk of earnings is in the form of dividends from UOB and UOL. Besides there is operating income from health care, leisure and rental from a few properties.

The extend of the Wee empire is quite incredible if one includes UOL in the picture. This is the poperty arm of course. Like an octopus this arm stretches across the property and hotel sectors through Pan Pacific Hotel and UIC which owns a huge chunk of Singland.

Directly Haw Par owns just a touch above 5% but the deemed interests of the Wee family exceeds 30%. Wow!

[Whaleseawit]

Hey guys, if I want to do an analysis on Haw Par's financial ratios, anyone can give me a suggestion on where I can get its industry ratios or who is its closest competitors? Considering that Haw Par has 3 main divisions in healthcare products, leisure and investments therefore it would be hard to find a similar company to compare with.

[freedom]

is Haw Par going to have a cash flow problem? possible if it continues to receive scrip dividend from its UOB stake, but I don't think it will be 2011, as the interim dividend by UOB was not scrip. But if we were to exclude dividend from UOB, the cash flow in 2011 would be just around enough or slightly short for its 20 cents dividend.

how to value Haw Par's financial assets(stake in UOB, UOL, UIC)? mark-to-market is apparently not appropriate as Wees probably intend to hold it for very long to control the wee empire. maybe we can use DCF in a way to value it. as most of its dividend is from UOB and UOB is quite a matured company. the dividend history has been $0.6 - $1. so dividend receivable from UOB alone is around 40 mil - 66 mil.

[pianist]

pardon me for asking this cos i never been to sentosa for many years already:
are dolphins in sentosa found only in haw par's underwater world resort?