Sardin

Guocera market share could be the top in Malaysia. But I'm not sure about its profitability.

2023-02-09 17:17

Sardin

It was the top but not sure if it remains the top

2023-02-09 22:01

Sardin

Hi Lionel Messi, according to my own calculation, it is possible that the amount of tile that Guoco consume might be able to take up all the supply from Guocera at the present stage but not sure after expanding to 3x of current capacity. However, the present tile business might be operating at tight margin. However, starts from FY2023 this will greatly improve and further improve in FY2024 due to a specific reason. No matter how, motorcycle business will remain the major contributor to the revenue and profit.

2023-02-09 22:44

Sardin

The tile business is so intense that manufacturers are cutting each other's throat

2023-02-09 22:56

lionel messi

Thanks Sardin. In a competitive business, the taikor with the deepest pocket will survive. Others will either fold or be acquired cheap cheap. Am sure Quek knows what he is doing. Cheers.

2023-02-10 08:45

Sardin

What I'm afraid is he's not facing a local taikors now, but the one from China, big one.

2023-02-10 16:23

stockraider

Yamaha is the top mkt cycle in msia mah!

HLI is the sole distributor loh!

2023-02-11 09:46

Sardin

Hi Stockraider, we were talking about tile business

2023-02-11 10:05

stockraider

I know, but 90% of HLI profits come from motorcycles mah!

2023-02-11 10:20

lionel messi

No worries Sardin. Ang Mohs don't want to buy many things from China. They boycott, tariff and sanction them. Malaysia can benefit. Wonderful.

2023-02-13 08:02

Sardin

This is my opinion on the new porcelain tile plant:
If the plan to invest 400 mil for a new porcelain plant can be executed with IRR of 4.55%, annual EPS might be increased by 4.45 sen. This investment may cost net cash per share to shrink by RM 1.27 per share to become around RM 3 per share. This is a better option to invest the cash when compare to money market fund that generates return at only around 1.05%.

2023-02-15 18:59

Sardin

Earthquake in Turkey, I think has destroyed far more houses than that destroyed in Russia-Ukraine war. And there will still be a series of earthquakes at the same region in following years according to geologist. Rebuild of the area will need a lot of tiles. This may create a spillover effect to the Asia Pacific market.

2023-02-15 19:12

Sardin

Another thing worth noting is that, tremendous reduction in sea freight compares to the past, is a very encouraging factor for exporting heavy goods like tiles. The big fat profit margin of the supply chain value just appear like that without needing to do anything.

2023-02-15 19:17

observatory

Shareholders may tolerate the management holding idle cash in search of a strategic acquisition/ investment. Failing to find such target, the management is expected to return the cash to shareholders either via special dividends or share buyback.

If the management squanders its cash on projects with just 4% to 5% return, while the cost of equity may be about 10%, the management is effectively destroying shareholder value.

If the management could waste RM400m now, it could waste even more cash in the future. Instituitional investors will vote with their feet given the management's lack of discipline and poor capital allocation skill. I'm afriad that share price will take a big hit.

The Board has a fiduciary duty to all shareholders to scrutinize the project. It needs to reassure shareholders that for any viable project, their targeted return is double digit, and nothing less!

2023-02-15 19:31

Sardin

Could it be a news purposely done to encourage investors to sell? So far it is just a plan, could be called off anytime soon right? Based on technical chart, this had triggered fear and the price once dip to nearly 8.70 at large volume but very soon got a strong rebounced, is this a war between the uninformed and informed? Look at the price movement and volume, I suspect someone is trying to control the price slightly below 9 by buying more but selling less but intense at the closing time. The purpose of doing this I guess is to collect the shares at below 9.

2023-02-16 09:23

observatory

There is no way to know the motive behind recent price movement for sure. However, we can still make some logical deductions.

As early as 4 Oct, the company has already made public in its annual report that “Looking forward, GHSB is exploring the establishment of a new plant with fully automated technology that requires minimal manpower and low energy consumption to expand its porcelain product range to grow its revenue and profit base.”

Note the recent share price weakness (frankly it is just a drop of mere few percents) happened in late Jan, a full three months after the original announcement. Given the time gap, it’s not likely that insiders manipulate the news for short term trading profit.

Besides, Tan Sri Quek’s brother is the board chairman and his daughter is a board member. The Quek’s family controls 76% of the shares, or over RM2.2 billion in market cap. Their family are multi-billionaires. It doesn’t make sense for them to risk reputation and criminal risks to support publication of false news.

Besides, the “large” trading volume you mentioned totaled about a million shares only. It looks large because this is an illiquid counter. With a share price difference of just 30 sen, any would be manipulator would earn not more than 300k! I bet the Queks would not want to associate themselves with any such small-time operator. Not to mention it would be easier to manipulate a penny stock than this illiquid counter.

One more point. The way I read it is this is quite likely a done deal. During the AGM on 2 Nov, the Board shared that “a) The new plant will be built at the available land area of the existing plant located at Kluang, Johor. b) The total investment cost estimated to be around RM400 million. c) The new plant targeted to be completed by end of 2024.”

Note the choice of word “will”.

In my view, a more likely explanation is this. Looking at the shareholder list, there are a few institutional funds where each hold 1 to 3 million shares. May be at the start of 2023, as fund managers reviewed their portfolio, one or two of them decided to trim because the relative risk reward was no longer appealing. Shareholders who thought otherwise bought the shares they dumped. Hence the price support.

2023-02-16 14:00

observatory

Honestly, I have a dim view on the way that Board/ management handles shareholders’ communication.

RM400 million cash isn’t a small sum. It’s worth two and a half years of dividends, or almost double of FY22 net profit. However, the management only mentioned the plan in one passing sentence in the Annual Report. There was zero mention of the investment cost.

If no one had asked during the subsequent AGM, we minority shareholders would not have known that the company plans to sink in RM400 million on a currently struggling business!

The Board/ management should recognize that the Quek family isn’t the sole owner. For the sake of better corporate governance, how difficult is it to disclose more timely info to minority shareholders?

Will the management dedicate at least one paragraph on this investment in the upcoming quarterly report? Please share your investment rationale in greater details with your other shareholders too! Tell them why this is the right strategic investment that will create long term shareholders’ value.

Would this be too much to ask for?

2023-02-16 14:02

lionel messi

Well articulated Observatory and Sardin. My simpleton theory is that the upcoming quarterly results may not be up to expectation resulting in insiders selling ahead and hence depressing price.

2023-02-16 16:14

Sardin

On 30th Jan I predicted Q2 EPS 25 sen, now the actual result revealed is 23.38 sen. Should be quite close right? :)

2023-02-16 19:37

lionel messi

Your the man Sardin. Obviously it's a miss by your estimation buy is it really so? Not too bad right?

2023-02-17 08:14

stockraider

Put it this way loh!
Instead of putting their cash in bank deposits earning 3%pa.....it is better for them to invest in the project loh!

The ROI of this project is 10% mah!

Posted by observatory > 18 hours ago | Report Abuse

Honestly, I have a dim view on the way that Board/ management handles shareholders’ communication.

RM400 million cash isn’t a small sum. It’s worth two and a half years of dividends, or almost double of FY22 net profit. However, the management only mentioned the plan in one passing sentence in the Annual Report. There was zero mention of the investment cost.

If no one had asked during the subsequent AGM, we minority shareholders would not have known that the company plans to sink in RM400 million on a currently struggling business!

The Board/ management should recognize that the Quek family isn’t the sole owner. For the sake of better corporate governance, how difficult is it to disclose more timely info to minority shareholders?

Will the management dedicate at least one paragraph on this investment in the upcoming quarterly report? Please share your investment rationale in greater details with your other shareholders too! Tell them why this is the right strategic investment that will create long term shareholders’ value.

Would this be too much to ask for?

2023-02-17 08:36

Sardin

Hi Lionel Messi, I estimated the Q2 EPS by using my own model and assumptions. With that level of estimated / true EPS, I think it is good to hold and perhaps slightly increase the stakeholding when the price dip to 8.70. This is because:
i) the dividend is in the up trend
ii) earning has basically recover post-Covid 19
iii) the PE is still cheap probably because of investor's memory about the big impact during MCO but MCO has came to past and this one-off incident/effect is gone and investor's confidence will recover after another 1 or 2 quarter showing steady / solid revenue and earnings. When this happen, PE and share price will improve to above PE 10
iv) I'll further improve my model of performance estimation based on latest quarter report and I feel that there might be positive factors towards next quarter earning in the brew.

2023-02-17 10:08

Sardin

The shallow dip of price despite moderately high volume shows that there are solid support to the price and that support is not likely from unimformed shareholders because this is not a hot stock. In other words, I suspect that the support come from "smart money".

2023-02-17 10:14

lionel messi

Thanks Sardin. Very insightful as always. I suspect the impending targeted fuel subsidy can be a major catalyst for HLI as more people switch to motorbikes. My simpleton hypothesis as always haha.

2023-02-17 14:47

Sardin

Target price RM 16.50 in next 3 years.

2023-02-22 10:25

stockraider

Go for it mah!
Veli bullish loh!

2023-02-22 11:38

lionel messi

OMG Sardin, RM16.50? That's wonderful. Well, you're the expert in HLI. Hope you will be right again.

2023-02-22 14:18

lionel messi

Meantime, I have the easy task. Just buy amap.....as much as possible. Cheers :)

2023-02-22 16:19

Integrity. Intelligent. Industrious. 3iii (iiinvestsmart)$€£¥

Security LastPr PE DY% Divcts ROE ttm-marg
HLIND (Automotive) 8.96 10.06 5.8 52 14.02 9.3

2 months ago

Sardin

The project for the new RM 400 mil porcelain plant is real. Many old factory buildings have been demolished. I visited the site. I don't think there is a turning back for this plan. A bit disappointed because this is not the best dream I had with the company's cash.

1 month ago

Sardin

If anyone is interested can just drive your car to Guocera factory in Kluang. It can be observed from the road side. You can see piles and piles of rubbles at the construction site. I think it has started to burn money while the new factory takes time to build.

1 month ago

lionel messi

Have some confidence bro. Am sure they know what they are doing. This is not a con man, scammer company like many on Bursa.

1 month ago

Sardin

Hi Lionel Messi, I agree that is not a con man. The biggest problem is I feel he is stingy lah. Already so much cash why not increase the payout ratio to 90%-100% woh. Everybody is getting old liao. Already hold more than 5 years lo. This durian tree only give me banana every year.

1 month ago

stockraider

On the positive side.........HLI put the money to work........instead of passively leaving it idle in fixed deposits loh!

Long term will be beneficial mah!

Also hli dividend yield now, already quite good mah!

1 month ago

Sardin

Hi Stockraider, I think Guocera should split from HLIND and pay the cash out as dividend so that we have the freedom whether or not to put that money into Guocera. So I think it has not done the best for shareholders like us. The earning and yield is still OK, but not attractive. It is a kind of stock you can only trust with a small percentage of your asset just like a stabiliser in a bottle of peanut butter.

1 month ago

Sardin

I hope the durian tree can give us durian this year.

1 month ago

Sardin

Hi Lionel Messi, targeted fuel subsidy in the brew as you expected.

1 month ago

lionel messi

Hi Sardin. Ya, it's a matter of when, not if. But likely after the upcoming state elections. Hope durian runtuh for motorbikes and our company.

1 month ago

stockraider

HLI another bluechip stock to consider loh!

1 month ago

lionel messi

Coming result and dividend going to be very good? Price movement is giving indication. Insiders are buying ahead? Go figure.

4 weeks ago

ykloh

Maybe also a bonus issue.

4 weeks ago

Sardin

Had been difficult to collect ticket. No seller below 9.20. :)

3 weeks ago

Sardin

The best timing to buy throughout the year. Isn't it? Very reasonable price just before the announcement of near record high quarter and annual result.

3 weeks ago

Sardin

Good quarter result and whole year result soon to be announced. Hope to get historical high of final and special dividend.

3 weeks ago

lionel messi

Go get some tickets Sardin. Got a few below RM9.20. Best time to nibble. Cheers.

3 weeks ago

x3mg33

posted dividends of 37sen yesterday

2 weeks ago

Sardin

Although reported only 21 sen EPS, the actual EPS is 24.8 sen if we exclude the "demolition of useless assets of the old tile factory appeared to be 12 million on the book". Remembered I told ya one month ago they had demolished the Guocera old tile factory? Current share price is supported by sustainable and conservative dividend payout at 6% dividend yield. 2x FD rate with a very solid state of balance sheet. Not very exciting but something you could rate it as a "bond share" and especially good for people with very large capital to invest where capital safety is first with very reasonable return.

2 weeks ago

stockraider

good solid investment loh!

2 weeks ago

Fabien _the efficient capital allocator

HLI has been increasing their dividends over the years
2018 - 47sen
2019 - 50sen
2020 - 42sen (exception - covid hits)
2021 - 52sen
2022 - 52sen
2023 - 57sen
2024 - 60sen?

1 week ago

ChloeTai

Dear brothers/sisters, has our government made an official announcement regarding the removal of price ceiling caps on the prices of eggs and chickens?

19 hours ago