Hsu Fu Chi

[winston]

Not vested. From DBS:-

Story: Management at Hsu Fu Chi (HFC) continues to deliver robust growth even in the face of rising raw material costs.

Point: Undoubtedly, 3Q results were strong due to the Lunar New Year. What surprised us on the upside was the 2.6ppt increase in gross margins to 46.8%, from 44.2% in 3Q07. This was achieved on the back of higher production volumes and higher ASPs, which increased by c. 10% y-o-y. 9M net profit for the Group ended at RMB360.6m, up 30% y-o-y.

Looking at its quarterly gross profit and margins, we note that it has been growing y-o-y. This reaffirms our view that a leading player like HFC is able to maintain its traction despite inflationary costs pressures on the back of its strong branding and distribution network.

It has 85 sales and distribution offices across the PRC and intends to increase this to 100 by
2009/10.

Relevance: We reiterate our view that the fundamentals of the company remain very firm, thanks to its strong management team, stable of brand names, distribution/sales channel and
strong balance sheet.

Regional and global peers are trading at an average forward PER of over 20x, versus HFC’s 12x. Although peers are larger in size and scale, the disparity of c. 40% is unjustified, in our view. This should narrow as management continues to grow its topline and deliver sustainable profit growth.

HFC is trading at 5.6x EV/EBITDA, 1.9x P/B and 1.1x P/S (on FY09F). It also has a reasonable net dividend yield of 2.9% and 3.4% in FYE Jun 08F and 09F based on our payout ratio assumption of 40%. It has a net cash of RMB550m (RMB0.69 or S$0.14 per share).

Maintain BUY, TP: S$1.49 premised on 16x FY09F earnings (previously 18x on blended FY08/09 EPS), at its historical average PER and a 25% discount to regional/global peers.

[winston]

Baring Asia buys 16.5% of Hsu Fu Chi for US$135m By ANGELA TAN

Baring Private Equity Asia on Thursday said one of its affiliates will invest US$135 million in Hsu Fu Chi International Limited, a leading confectionary group in China listed on the Singapore Exchange.

With the investment, Baring Asia has become a significant shareholder in Hsu Fu Chi, with a 16.5 per cent stake.

Kenneth Cheong, Managing Director of Baring Asia, said the fund was attracted to the China company's strong brand and market position in the mainland's confectionery sector.

Source: Business Times

[ichew]

the pple who sold to baring asia are TIH (transpac industrial holdings)
i am very very vested in TIH
holding time-frame = 6mths until TIH's FY results
i believe TIH is still under-valued at this price $1.45.
caveat emptor .. my own views ..

once i find time, i will do a write up on why i am so heavily vested in TIH
then we can mebbe see if i had gone wrong in my analysis somewhere

[winston]

Not vested. From Kim Eng:-

Baring Asia acquires 16.5% of Hsu Fu Chi

Baring Private Equity Asia has emerged as a substantial shareholder of China-based Hsu Fu Chi International, after an affiliate invested US$135 million for a 16.5 per cent stake in the Singapore Exchange mainboard-listed confectionary group. The fund's managing director Gordon Shaw will be appointed to the board of directors of Hsu Fu Chi with effect from Nov 1.

Founded by Taiwanese in 1992, Hsu Fu Chi is now one of the top confectionary companies in China. It has been listed on SGX since December 2006. Hsu Fu Chi has a strong distribution and marketing network, with 107 sales offices and a sales team of more than 8,000 sales personnel who directly control over 13,100 retail sales points.

Its core production bases are located in Dongguan with annual production capacity of 317,100 tonnes. With over 99 per cent of its products sold in China, Hsu Fu Chi employs a multi-product strategy. Its products are sold under its primary brand Hsu Fu Chi as well as secondary brands such as DoDo, Chaobii, Mo Bao, and Mao Qiao Bo.

Last week, Hsu Fu Chi reported a 97.1 per cent year-on-year surge in net profit to 92.15 million yuan (S$18.8 million) for its fiscal first quarter ended Sept 30 on higher sales and absence of foreign exchange losses. Revenue grew 6.6 per cent to 716.74 million yuan, and cash and cash equivalents jumped 39 per cent to 1.04 billion yuan.

Baring Asia is one of the largest regional growth equity firms in Asia with US$2.5 billion under management. It specialises in growth equity investments and mid-market buyouts targeting growing businesses with enterprise values between US$100 million and US$500 million.

Mr Shaw will replace previous group director Cheong Kok Yew as member of the audit, nominating and remuneration committees with effect from Nov 1. The resignation of Mr Cheong on Oct 23 arose from the cessation of Transpac Nominees as a substantial shareholder of Hsu Fu Chi.

Mr Cheong was executive director of Transpac Capital. While Mr Shaw has no prior experience as a director of a SGX-listed company, he has been director of various listed companies listed on the Hong Kong Stock Exchange. He has a deemed interest of 7,000 shares in Hsu Fu Chi through his spouse.

Source: Business Times

[millionairemind]

I peeked at the Financial statement. A few (pink) flags

Inventory doubled and trade rec. increased 150%. I am not following this company closely so others can probably comment more

February 8, 2010, 7.03 pm (Singapore time)

Hsu Fu Chi's Q2 net profit jumps 50.5%

By ANGELA TAN

Hsu Fu Chi International Limited reported on Monday net profit for the second quarter to end December 31 jjumped 50.5 per cent to RMB236.35 million (US$34.62 million).

Revenue, however, slipped 2.4 per cent to RMB1.31 billion. The fall was due mainly to the Chinese New Year peak season starting later in 2010 and the impact brought about by the global financial crisis.

[winston]

Not vested. From Lim & Tan:-

Another Strong Quarter Ahead S$2.05-HFCI.SI

In line with management’s guidance, 2Q ended Dec ’09 sales posted a marginal 2.4% yoy decline to RMB1.3bln, bringing 1H ended Dec ’09 sales to RMB2.029bln, a marginal 0.6% up from last year.

2Q’s marginal decline was due to the Chinese New Year Peak season commencing later in 2010.

However, bottom-line rose a robust 51% yoy and 157% qoq to RMB236.4mln, reflecting improved gross margins due to lower raw material costs, lower SG&A expenses, forex loss and tax rate.

Good working capital management saw operating cash flow of RMB347mln for the half year, slightly higher than its profit of RMB329mln, more than enough to cover capex of RMB321mln, giving free cash flow of RMB26mln.

After div payment of RMB231mln, cash fell from RMB1bln to RMB796mln versus debts of RMB155mln, giving net cash position of RMB641mln, representing 8% of its current market cap.

The next quarter would likely be another strong quarter due to the Chinese New Year Peak season commencing later than usual in 2010 and inventories have risen 98% to RMB452mln in anticipation of robust demand while trade receivables rose 149% due to strong sales late in the quarter (and likely spilling over into 3Q ending March ’10). Payables also rose 119%.

Reflecting management’s optimistic medium term outlook, they are spending RMB321mln to build 3 new factories in Northern, Eastern and Western parts of China, complementing their existing Southern factory in Dongguan. This will help improve their time to market and reduce operating costs as they have 16,000 point of sales and 107 sales offices located across the entire China.

At 13-14x trailing PE, the stock remains cheap compared to its peers such as Tingyi and Want Want in Hong Kong (average of 33-35x PE) and this is despite offering similar ROEs and profit margins. We maintain BUY.

[winston]

Not vested

Revenue down 14% yoy
Profit up 30% yoy

http://info.sgx.com/webcoranncatth.nsf/ ... penelement

[ichew]

div up to 75 rmb cents (38 final + 37 special)
last yr was 29 rmb cents
abt 5+ % yield at S$2.6
not too bad
hope they continue

[winston]

Revenue down 14% yoy

Wonder why Revenue was down 14% yoy ?

When I have some time, I may investigate but there are a lot of other counters out there so why would I want to spend my time on this one ?

Isn't this supposed to be a growth business ?

If they cant grow at this point in time, will they be really grow in the future ?

[Chinaman]

div up to 75 rmb cents (38 final + 37 special)
last yr was 29 rmb cents
abt 5+ % yield at S$2.6
not too bad
hope they continue

Ichew bro, u r a good stock picker....i salute you....u comparable to fund mgr, hehe...looking at some of yr portfolio.

Hsu Fu Chi to me this counter can keep for mid term...dividend better than cpf interest.

vested.