Haw Par Corporation Ltd (SGX: H02) is a conglomerate founded in 1969. The group has four major divisions — healthcare (where it manufactures, sells and distributes health patches and ointments under its Tiger Balm brand), Leisure, Property, and Investments. The group released its first quarter 2019 (Q1 2019) earnings yesterday.
Here are five highlights from Haw Par’s latest earnings report:
1. Revenue increased by 22.3% year-on-year from S$60 million to S$73.4 million. This was mainly due to higher demand for healthcare products, which translated to higher sales.
2. However, cost of sales rose 36.4% year-on-year to S$29.8 million from S$21.8 million, as a result of higher raw materials costs. Consequently, gross profit increased by a smaller 14.2% year-on-year to S$43.6 million. Gross margin declined from 64% to 59%.
3. Marketing and distribution expenses rose by 24.3% year-on-year, in line with increased promotional and marketing for Healthcare division. However, administrative expenses remained largely flat. As a result, profit before tax increased by 9.5% year-on-year. With a lower tax expense for Q1 2019, net profit after tax ended up increasing by 14.1% year-on-year. Earnings per share stood at 10.0 Singapore cents for the quarter.
4. Haw Par continues to maintain a strong balance sheet, with S$529 million in cash and just S$23 million of borrowings. Strategic investments, which consists of shareholdings in United Overseas Bank Ltd (SGX: U11) and UOL Group Limited (SGX: U14), had a value of S$2.45 billion. Net asset value for the group improved from S$13.26 to S$13.85 as of 31 March 2019.
5. The group continued to generate healthy operating cash flow of S$6.3 million, while capital expenditure remained low at just S$174,000. At Haw Par’s share price of S$13.75 as of 8 May 2019, the shares are trading at a price-to-book of 0.99x.
Haw Par continues to show encouraging signs of being able to grow its Healthcare division’s revenue, and the Q1 2019 numbers are a testament to that. Its stakes in UOB and UOL continue to provide a reliable and consistent source of dividend income for the group. As long as raw material prices do not spike up, investors should not be worried about margins for its Healthcare division. I am confident that the group will continue to do well, barring a sharp economic crisis which may crimp demand for consumer products.
The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. Motley Fool Singapore contributor Royston Yang does not own shares in Haw Par Corporation Ltd. The Motley Fool Singapore has recommended shares of Haw Par Corporation Ltd and United Overseas Bank Ltd.