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Latest Earnings From Haw Par Corporation Ltd: A Mixed Outlook

Haw Par Corporation Ltd (SGX: H02) reported its fiscal second-quarter results last Friday. The reporting period was for 1 April 2016 to 30 June 2016.

As a quick background, Haw Par is perhaps most well-known amongst consumers for its Tiger Balm ointment – it has a history of more than a hundred years. While Haw Par started out in businesses dealing with Traditional Chinese Medicine (TCM), it has since branched out in a number of different directions.

For instance, the company owns strategic investments in Singapore-listed companies such as United Overseas Bank Ltd (SGX: U11) and UOL Group Limited (SGX: U14) among others. The company was also in the tourism business, running the Underwater World aquarium in Sentosa Island. But, the aquarium has ceased operations as of 26 June 2016.

With that, let’s take a look at the company’s latest results. The following’s a quick summary of some of the latest financial figures from Haw Par:

  1. Revenue for the quarter came in at S$52.6 million, up 2.8% from a year ago.
  2. But, net profit took a dive, falling 58.3% year-on-year to $133.8 million due to lower dividend income from equity investments and lower one-off gains recorded in the second-quarter of 2015 from the partial sale and reclassification of Hua Han Health Industry Holdings Limited. If the one-off gains were excluded, Haw Par’s net profit would only have been 19.8% lower.
  3. Cash flow from operations came in at S$45.4 million with capital expenditure clocking in at S$0.4 million, thus giving rise to free cash flow of S$45 million. This is down slightly from the prior year when there was free cash flow of S$48.1 million (cash flow from operations of S$48.3 million and capex of S$0.2 million).
  4. As of 30 June 2016, Haw Par had S$319.4 million in cash and equivalents and total borrowings of S$48.8 billion. This implies a net cash position of S$270.6 million, an improvement from a year ago when the net cash position was S$215.2 million.
  5. Haw Par ended the reporting quarter with a book value per share of S$10.67, down 17% from a year ago.
  6. Lastly, Haw Par announced a first and interim dividend of S$0.10 per share, up 67% from the S$0.06 per share seen a year before.

In summary, Haw Par had a lacklustre quarter with stagnant revenue and a fall in profit. But, the company managed to maintain its free cash flow and its balance sheet remains strong.

The earnings release also contained commentary from Haw Par on its outlook ahead. It appears mixed. Here’s what the company said:

“Investments will be affected by volatility of financial markets in the light of increasingly uncertain global economic conditions.

Income from Property remains stable amidst a challenging property market. Healthcare remains cautiously optimistic on its business outlook. Its performance continues to be on track. The closure of UWS will not have a significant impact on the Group’s performance.”

Shares of Haw Par closed at S$8.87 each today. This price gives the company a price-to-book ratio of 0.8.

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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 James Yeo doesn’t own shares in any companies mentioned.