- manufacturing & trading of biomass materials & value-added products
- manufacturing & trading of mattress & related products
It is actually "several streets" ahead of other identified key market players in the country's biomass material market, in term of size, revenue and profit.
|Lines||Monthly Capacity||2013 Utilization %|
|Coconut Fiber||2||546 MT||53.1|
|Oil Palm EFB Fiber||20||8,372 MT||74.1|
|Coconut Fiber Sheet||3||491,400 m||32.9|
After all these, Heng Huat may not need too much cash for capital expenditure.
China is Heng Huat's major market for its oil palm EFB fiber, which makes up 55.2% of its total revenue in 2013.
Its exports to China has more than doubled from RM18.7mil in FY11 to RM40.7mil in FY13.
Its total number of customers for biomass materials & value-added products have increased from 110 in year 2011 to 139 in year 2013. Customers in mattress division also increases from 875 to 1,242 from year 2012 to 2013.
Anyway, personally I am hopeful that palm briquettes will help Heng Huat to grow significantly in years to come. The sales of briquette, which is mainly to local customers at the moment, just contributes 2.5% of its total revenue on FY13.
Just imagine how much coal, wood, petrochemicals etc are burnt for energy everyday in the world. If palm briquette is so good like what Heng Huat says, I can't think of any reason why people don't want to change to briquette. It's actually cheaper & more efficient than coal & firewood!
More details of palm briquette can be found in Heng Huat's website.
If you think Heng Huat has a good business model and its products have a good future, is it worth to invest in the company right now?
Lets check on Heng Huat's past financial results.
|HHGroup (RM mil)||1H14||1H13|
Profit margin remain good, with effective tax rate at only 12.2% in this period of time due to products granted pioneer status with tax exemption.
|Company||Products||Years||Tax Exemption Period|
|HK Fiber||Coconut Fiber Sheet||5||1 Apr12 – 31 Mac17|
|HK Kitaran||Palm Biomass Fiber||10||1 Jul10 – 30 Jun20|
|HK Kitaran||Palm Briquettes||5||1 Feb13 – 31 Jan18|
For FY13, sales in oil palm EFB fiber was stagnant but new product palm briquette starts to make meaningful contribution.
Revenue from coconut fiber division remain flat in FY12-FY13, while mattress sales improves significantly though this division is still struggling to generate profit.
Table below shows the latest segmental result of Heng Huat (6 months into FY14). These figures are before elimination of inter-segmental transaction.
|RM mil||1H14||1H13||Change %|
Revenue and PBT of biomass materials registers healthy YoY growth at 40%+.
During its IPO in July, projected EPS of FY14 given by a few analysts are as below:
- Kenanga - 5.22 sen
- Maybank IB - 5.0 sen
- Inter-Pacific - 5.8 sen
Nevertheless, we can't actually rule out that it will give negative surprise in its quarterly results later.
Lets see its financial results of subsequent quarters.