Description

Murray Stahl, whom most of you probably know of Horizon fame, likes to write about owner operators and bits and pieces.  In this write-up we offer you Haw Par, a 2 for 1 Murrayesque special that we don’t believe he has ever written about it.

Haw Par is a Singapore listed holding company controlled by the Wee family.  As a sum of the parts the headline numbers are a 40% discount to NAV and a single digit look through p/e multiple accompanied by a 2.5% dividend yield.

Listed assets make up the vast majority of the NAV, with United Overseas Bank of Singapore being the largest piece of NAV.  UOB is a well respected, long entrenched member of the Singaporean banking oligopoly.  It is conservatively managed and I am not a financials expert, but the annual report reads well and management appears on the surface to be competent.  The company skated through the GFC without issuing equity and has grown at a respectable clip over the years.  Bernstein did a nice initiation on the Singapore banks in the last year or so, and I would recommend that is background reading if you are interested in learning more about the name.  As much as I hate financials, the Singaporean banks seem like they have a license to print money due to the competitive environment, or lack of it.

The other notable publicly listed bits are the property companies UOL SP and UIC SP.  Both seem to OK on the surface with some latent value available from repositioning/monetizing assets.  The last publicly listed bit is Hong Kong listed Hua Han,  a traditional Chinese medicine (TCM) company that markets its products under the Yeosure brand name.  Hua Han is the smallest of the publicly listed bits and I don’t have much to add on this one.

On the private side the most interesting bit is the Healthcare biz, which is basically the Tiger Balm product.  You may have used Tiger Balm on muscle aches in the past.  It is available at any CVS/Walgreens and is a global product that dates back 100s of years.  I even once bought a bulk pack at Costco, which suggests it is somewhat mainstream (yes I have lots of aches and pains).  The biz generates 20%+ operating margins and I conservatively place an estimate of 10x EBIT on the 2012 profit stream.  I would argue that precedent transactions would suggest that multiple could be 50% too low.

There is a leisure biz that is the Singapore aquarium that is now sort of a crummy asset due to a new competitor opening up and an aquarium in Pattaya (near Bangkok) that opened in 2003.  I put a 6x EBIT multiple on this group as it has anemic growth prospects.

The last private bit is the property rental biz with a book value of 181m.  I put use a 10% cap rate on pre-tax earnings on this to be conservative, which gives me a discount of 45% to book value.  I think a 10% cap rate is pretty conservative and provides a bit of a margin of safety.  If you have been to Singapore, you should note the key real estate assets are Haw Par Centre and Haw Par Glass Tower, both iconic assets that are literally next door to the famed Orchard Road.

The spreadsheet hopefully copies well.  If not the salient figures are the stock trades at 59% of NAV and a look through earnings multiple of 6.8x on estimated earnings for 2013 (Bloomberg). The Wees have occasionally bought stock personally but I guess they could try screw shareholders if so inclined.

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