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Singapore’s Big Loser of the Week: Hong Leong Asia Ltd

Credit: hobvias sudoneighm

Hong Leong Asia Ltd (SGX: H22) had slumped by 7.4% since the end of last week to close at S$0.87 yesterday. In contrast, Singapore’s market benchmark, the Straits Times Index (SGX: ^STI), had slipped by ‘only’ 1.4% over the same period. This makes Hong Leong Asia a big loser for this week.

Hong Leong Asia is a major diversified industrial conglomerate which manufactures and distributes diesel engines and related products, building materials, consumer products, industrial packaging products, and air-conditioning systems.

Despite being a Singapore-listed company, Hong Leong Asia’s main geographical market is China. For the year ended 31 December 2014, revenue contribution from China was S$3.9 billion out of the firm’s total revenue of S$4.6 billion. Singapore contributed around 8% to the total.

On Wednesday, the conglomerate announced that it “expects to report a loss for the third quarter ended 30 September 2015.” This may also lead to a loss for the nine months to 30 September.

The reasons for the poor showing are twofold:

  • Higher losses from the consumer products unit on the back of lower units sold; and
  • Insufficient profits generated by the other business segments to cover the losses from the consumer products unit

According to Hong Leong Asia’s 2014 Annual Report, the firm’s consumer products unit, Henan Xinfei Electric Co., Ltd, is one of the leading manufacturers of major consumer appliances in China. The unit’s products, which are sold to residents in China, include consumer appliances such as refrigerators, freezers, wine chillers, air –conditioners, and washing machines.

Investors will know for sure how the company has performed for the third quarter and nine months ended 30 September 2015 when it releases its financial results next month.

At its current price, Hong Leong Asia is valued at just 0.4 times its book value and is yielding 3.5%.

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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 Sudhan P doesn’t own shares in any companies mentioned.