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3 Things Investors Should Know About Hap Seng Consolidated Bhd

Hap Seng Consolidated Bhd (KLSE: 3034.KL) is a Malaysian conglomerate. Given the nametag ‘conglomerate,’ it’s perhaps no real surprise to find that the company is in a variety of businesses.

All told, it has six businesses, namely, plantations, property development, credit financing, automotive, fertilizers trading, and building materials.

Hap Seng has been one of the best performing stocks in Bursa Malaysia, Malaysia’s stock market, over the past five years – its stock price is up by over 480%.

Let’s have a look at three things which can help investors better understand the company:

1. Strong historical growth in revenue and profit

The following is a table showing Hap Seng’s top-line and bottom-line from the fiscal year ended 31 January 2007 to the fiscal year ended 31 December 2015 (the company had a change in its fiscal year end in 2008):

hap-seng-buiness-growth-table
Source: S&P Global Market Intelligence

We can see that Hap Seng’s revenue has expanded at a healthy clip of 10.6% per year in the last decade. Its profit has grown at an even faster pace of 27.3%.

2. Diversified income base

Given the fact that Hap Seng has six lines of business, it’s no surprise to learn that the company has a diversified income base. In 2015, 52% of its operating profit came from the property business, 19% from credit financing, 18% from plantations, while the remaining 11% came from the rest.

Generally speaking, being diversified gives a company’s overall business more resilience to external shocks; when one business segment isn’t doing well, another can help pull up the slack.

3. Presence of substantial shareholder

According to Hap Seng’s 2015 annual report, Tan Sri Datuk Seri Panglima Lau Cho Kun @ Lau Yu Chak controls 73.99% of the company’s shares as of 31 March 2016.

The presence of a single majority owner in a company may be both positive and negative from the perspective of a minority shareholder.

One main positive is that by having a controlling stake, the main shareholder can shape the overall strategy of the company and make decisions that focus on long-term wealth generation.

The negative, however, is that minority shareholders may not be treated fairly.

It’s up to each individual to decide if Hap Seng’s large individual shareholder has been a boon or bane. It’s worth noting two things I’ve mentioned earlier about Hap Seng: The company’s track record of growth and its strong price appreciation.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.