Tuesday, 25 August 2015

Heng Huat: RM15mil PATAMI On Track

Heng Huat FY15Q2 Financial Results

HHG (RM mil) FY15Q2 FY15Q1 FY14Q4 FY14Q3 FY14Q2
Revenue 26.6 26.5 23.2 23.1 24.1
Gross Profit 12.9 10.6 8.8 10.4 10.4
Gross% 48.5 40.0 37.9 45.0 43.2
PBT 6.2 3.5 3.5 2.3 3.7
PBT% 23.3 13.2 15.1 9.9 15.2
PATAMI 5.0 2.9 3.4 1.2 2.7






Biomass Rev 21.8 19.9 18.1 18.6 19.7
Mattress Rev 6.6 12.6 9.8 9.1 9.2
Biomass OP 6.4 3.6 3.6 4.3 4.2
Mattress OP 0.04 0.3 -0.1 -0.1 -0.2






Total Equity 75.1 70.0 68.3 64.8 43.1
Total Assets 117.4 114.3 109.8 110.5 95.3
Trade Receivables 30.1 26.7 22.3 19.7 21.4
Inventories 5.8 4.8 5.9 6.3 5.4
Cash 13.7 14.1 15.2 18.8 2.6






Total Liabilities 37.1 39.9 36.8 42.2 49
Trade Payables 11.8 13.1 11.2 9.2 11.4
ST Borrowings 13.9 11.4 9.6 12.1 15.5
LT Borrowings 10.5 14.3 15.3 19.0 20.5






Net Cash Flow -1.6 -1.2 13.0 16.6 0.4
CFOperation 7.3 4.9 13.5 8.7 6.5
Depreciation 3.5 1.6 5.9 4.3 2.8
CFInvestment -4.3 -4.3 -7.7 -7.5 -5.1
Purchase PPE 4.5 4.5 7.1 7.1 4.7
CFFinancing -4.6 -1.7 7.3 15.5 -1.1
FCF 2.8 0.4 6.4 1.6 1.8






EPS 2.45 1.42 1.67 0.64 1.69
NAS 0.36 0.34 0.38 0.38 0.27
D/E Ratio 0.14 0.17 0.14 0.19 0.77


Heng Huat's FY15Q2's revenue is marginally higher than FY15Q1 but PBT increases by an astonishing 77%, thanks to vast improvement in profit margin.

It is a record-breaking quarter for this relatively new company proposing to be transferred to main board.

The higher profit margin is contributed by higher average selling price of its biomass materials and lower raw material cost.

However, revenue from mattress division falls quite significantly but still able to stay profitable.

At first half of FY15, revenue increases 17% to RM53mil, while PATAMI improves 39% to RM7.95mil compared to 1H14.

This means that the RM15mil PATAMI the management guided earlier is highly achievable.

Heng Huat has recently completed the acquisition of land in Gua Musang to build a new plant which is expected to be operational in Q2 of 2016.

The new plant will increase its oil palm EFB fibre production lines from 20 to 27, with annual capacity rising from 100.5k tonnes to 135k tonnes.

The capacity expansion is mainly to cater for rising China demand, as well as new markets in Australia, South Korea and Japan.

Besides, the construction of its biomass power plant is expected to be completed in Q3 of 2016.




After bonus issue, Heng Huat's ordinary shares have increased to 308.7mil. 

If its PATAMI can reach RM15mil in FY15, projected EPS will be 4.86sen.

At current share price of 37.5sen, it is trading at forward PE of 7.7x.

As about 45% of its sales are to China, current devaluation of RMB and fear of China slow down have already affected Heng Huat's share price negatively.

Its share price has fallen 19% from 45.5sen since its bonus issue ex-ed in early July.

Since biomass market is forecasted to grow further, and Heng Huat is still showing signs of growth, probably I will continue to hold its shares despite China concern.

10 comments:

  1. hi sir, actually what is the biomass product from HH?? thanks

    ReplyDelete
    Replies
    1. Hi hissyu2. HH sells mainly processed oil palm empty fruit bunch & coconut husk fibre, and also finished products such as briquette, mattress, geotextile etc. You can go to HH website to find out in more detail.

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  2. im amazed by its profit margin growth due to dirt cheap palm fibre material cost, im sorry also for my wrong view on this counter, Bd.

    Now im totally 改观, and i took some position.

    i foresee Henghuat is able to outperform furniture stocks including Latitude.

    ReplyDelete
    Replies
    1. I think there's no right or wrong view, and it's still a bit early to judge HH. So no need to feel sorry. Hopefully this kind of margin can sustain. When FFB harvest increase, price of EFB should remain low I guess.

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  3. will include this into my bucket list once the storm is over... net FF flow out is creating chao every single day...

    ReplyDelete
    Replies
    1. Really don't know when the storm will be over...

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  4. Happy to see this result as well, was waiting to drop below my average so that I can add some but so far still strong :)

    ReplyDelete
    Replies
    1. Seems like its share price is also a bit hesitant to go up...

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  5. Hi B_D, above quarter result EPS =2.45 is based on 205800 shares ( without count in bonus share ), please refer to B10. cheers.

    ReplyDelete
    Replies
    1. Ya, that EPS in Q2 is before bonus issue.

      Delete