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The Best Hong Leong Company To Buy

HongLeongGroupHong Leong Group (Singapore) is another one of Singapore’s large conglomerates.  Some of the others include Jardine, Keppel, United Overseas and property conglomerate Mapletree. Phew!

Hong Leong Group (Singapore) should not be confused with the other Hong Leong, which is based in Malaysia. Although the two companies share a similar name (almost identical), and they have different billionaires with similar surnames (identical in Chinese) at the helm, they are, in fact, two separate entities.

Hong Leong Group (Singapore) is not a quoted company. So we can’t invest in it directly. But while the parent company is off-limits, some of its subsidiaries are not.

City Developments (SGX: C09) is one of the company’s biggest subsidiaries. It has a market value of S$9.2b. Over the last decade, the developer of Coco Palms in Pasir Ris and Echelon on Alexandra Road has delivered an annual total return of 9.2%. Without the reinvested dividends, the return would have been a more modest 7.7%.

Closely akin to property are the group’s hotel interests, some of which are held in CDL Hospitality Trust (SGX: J85). The trusts’ largest shareholder, namely Hospitality Holdings, is a subsidiary of City Developments.  CDLHT’s assets include 12 hotels and two resorts. In Singapore it is probably best known for its Orchard Hotel on Orchard Road and Grand Copthorne Waterfront Hotel in River Valley.

CDLHT has only been on the market for about eight years. But over that time, the stapled trust has delivered an annual total return of 16.2%. In other words, S$10,000 invested in the company in July 2006 would have turned into S$32,888 today.

Apart from Singapore, Hong Leong Group also has a London-listed entity, Millennium & Copthorne (LSE: MLC), which owns and operates a portfolio of 120 hotels in 18 countries. They include Millennium Hotel in Paris, Grand Millennium in Kuala Lumpur and Copthorne Tara in London’s upmarket Kensington district. But size doesn’t necessarily mean bigger returns. Over the last eight years, M&C has returned 7.1%, which is less than its Singapore’s stable mate CDLHT.

Hong Leong Finance (SGX: S41) is the financial arm of Hong Leong Group. The company provides financial services and products to both retail customers and small and medium sized enterprises in Singapore. Over the last decade, Hong Leong Finance has an delivered an annual total return of 4.9%, which lags Singapore’s three main banks, DBD (SGX: D05), UOB (SGX: U11) and OCBC (SGX: O39).

Hong Leong has a quoted company in Hong Kong, namely, City e-Solutions (SEHK: 557). This setup, which provides services to the hospitality sector, is only marginally profitable. Since 1992, the shares have delivered a negative return of 7% a year.

Elsewhere, Hong Leong Asia (SGX: H22), the trading and manufacturing division of the group, owns China Yuchai (NYSE: CYD), which sells diesel and natural gas engines. China Yuchai is, in turn, invested in HL Global Enterprises (SGX: L18), which operates and manages hotel and restaurants in Singapore, Malaysia and the People’s Republic of China.

Over the last five years, HL Global Enterprises has delivered a negative annual total return of 11%; Hong Long Asia has managed to reward investors with 16% return, while China Yuchai International has delivered a total return of 32%.

Hong Leong Group is a sprawling conglomerate with interests in property, hotels, finance, trading, manufacturing and restaurants. The seemingly disparate collection of businesses has delivered differing returns for investors over the years. Interestingly, the ones that have delivered better returns tend to be the ones with higher Returns on Equity.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.