Hap Seng Consolidated Bhd established itself as one of Malaysia’s top 30 listed companies by market Capitalisation when it was promoted to the FTSE Bursa Malaysia KLCI on June 2 last year.
At the time, its share price was RM7.78, which gave it a market Capitalisation of RM19.37 billion. The counter has since climbed steadily, closing at RM9.05 on Aug 22 for a market Capitalisation of RM22.53 billion.
With interests in the plantation, property, automotive, non-bank credit financing, building material and fertiliser trading industries, Hap Seng is probably among the handful of diversified companies on Bursa that have been able to deliver commendable results.
If an investor had bought 10,000 Hap Seng shares on April 1, 2014, at RM2.535 a piece or RM25,350 in total, his return on investment would have been 300% as at June 30 this year, including dividends received. By then, the stock had leapt to RM9.23, up 264% in 26 months. Hap Seng has declared a total dividend of 90 sen per share in the past three financial years ended Dec 31.
Between FY2014 and FY2016, Hap Seng rewarded shareholders with a rather generous payout of between 68% and 86%, thus winning The Edge Billion Ringgit Club’s award for highest return to shareholders over three years in the big Cap company category.
The group’s outstanding performance over the three years was attributed to several factors on top of consistent profit growth in its credit financing business.
FY2014 was a bumper year for Hap Seng with its profit before tax breaching the RM1 billion mark. That year, the group’s property arm raked in an operating profit of RM705 million compared with RM256 million in the previous year, representing 68.8% of its total PBT that year. The leap was thanks to good take-up rates in its premium residential projects in Bangsar, Jalan Tun Razak and Puchong.
That year also saw its automotive arm, which distributes Mercedes-Benz vehicles, return to the black after a loss-making year. This achievement was bettered in FY2015 when the launch of two new models brought its operating profit beyond RM20 million for the first time.
FY2015 was, however, challenging for both its plantation and fertiliser trading arms for crude palm oil (CPO) prices halved from a 2014 high of US$860 (RM3,681) per tonne. Despite that, the group outperformed, lifted by the automotive and credit financing businesses, together with sale of land in Sabah and its credit business in Singapore.
In FY2016, Hap Seng’s profit after tax (PAT) hit the RM1 billion mark, up from RM908.47 million in FY2015 and RM753.46 million in FY2014.
In FY2016, the group received a big boost from its building material arm, whose operating profit grew over 14 times year on year to RM145 million after it included the operations of newly acquired tile manufacturer Malaysian Mosaics Sdn Bhd.
Hap Seng’s earnings growth did not end there. In its first quarter ended March 31, 2017 (1QFY2017), PAT grew 10% year on year to RM154.37 million, thanks to an increase in profit at all its businesses. Revenue rose to RM1.18 billion in 1QFY2017 from RM1.05 billion in the previous corresponding period.
Its strategy of balancing its exposure to the automotive, commodity, finance, property and commercial product trading businesses has stood Hap Seng and its shareholders in good stead, making it a fitting example for Corporate Malaysia.