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This Company’s Share Price Has Grown by 1,200% In the Last Five Years: Can It Continue?

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At the height of the Global Financial Crisis of 2008-09, many companies were hit hard. Property developer Hiap Hoe (SGX: 5JK) was one of those who was hit really hard; after suffering a 67.8% drop in revenue in 2008, Hiap Hoe even became a penny share at the depths of the crisis, falling to a low of S$0.07 in price.

The company was really struggling back then and even had to raise capital to shore up its balance sheet by undertaking a rights issue in July 2008. But, the company has managed to bounce back and is now stronger than ever.

With a net profit of S$8.3 million and S$80 million in 2008 and 2013 respectively, that’s a compounded annualised growth rate of some 57.3%; in fact, earnings at the company have been increasing in each consecutive year since 2008.

As Hiap Hoe’s fortunes improved, its balance sheet has also strengthened; the company’s net debt (total debt minus total cash) to equity ratio has been reduced from 2.26 in 2009 to 0.69 in 2013. That’s not all: Hiap Hoe has managed to share the joy of improving earnings with its shareholders in the form of growing dividends; the company’s dividend pay-out ratio has improved from 3.45% in 2008 to 11.8% in 2013.

Today, Hiap Hoe wears many hats. It’s a niche premium-property developer in Singapore and Australia; it’s an owner of two hotels in Singapore that are currently being managed by the Wyndham Group; it’s a strong player in the construction field with an investment (made in 2013) in Ley Choon Group (SGX: Q0X), an underground utilities infrastructure service provider with a history of more than 20 years; and lastly, it’s a close working partner with Superbowl Holdings (SGX: S48) in many joint venture projects. Interestingly, Hiap Hoe and Superbowl can be considered to be related companies given that Mr. Teo Ho Beng is the executive chairman and chief executive of both.

Today, Hiap Hoe wears many hats. It’s a niche premium-property developer in Singapore and Australia; it’s an owner of two hotels in Singapore that are currently being managed by the Wyndham Group; it’s a strong player in the construction field with an investment (made in 2013) in Ley Choon Group (SGX: Q0X), an underground utilities infrastructure service provider with a history of more than 20 years; and lastly, it’s a close working partner with Superbowl Holdings (SGX: S48) in many joint venture projects. Interestingly, Hiap Hoe and Superbowl can be considered to be related companies given that Mr. Teo Ho Beng is the executive chairman and chief executive of both companies.

Despite all the improvements Hiap Hoe has seen in its business, it’s certainly not resting on its laurels. Just this week, it had launched its latest development in Melbourne, Australia – the Marina Tower Melbourne. The tower will be the tallest building in Melbourne’s New Quay precinct, overseeing Victoria Harbour. The whole project would include two residential towers for sale and a 7-storey hotel for investment which will be managed by Sheraton Melbourne Docklands.

Hiap Hoe has been aggressive with its investments in Australia with the country expected to be a major geographical source of revenue for the company in the future; currently, Singapore is Hiap Hoe’s main market.

Foolish Summary

Hiap Hoe’s growth has indeed been amazing over the past five years. Now with Singapore’s residential property market slowing, can Australia be the solution that enables Hiap Hoe to continue growing? Although only time can tell if Hiap Hoe would be a success in Australia, the company is definitely optimistic about its prospects in the country.

Hiap Hoe’s shares currently trades around S$0.895, up more than 1,179% since its financial crisis low.

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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 contributor Stanley Lim doesn’t own shares in any companies mentioned.