Haw Par Corporation Ltd (SGX: H02) is the maker of the Tiger Balm brand of ointment. Other than its healthcare arm, it also has strategic stakes in UOL Group Limited (SGX: U14) and United Overseas Bank Ltd (SGX: U11).
Haw Par recently caught my attention due to its strong share price performance in the last five years, up by about 60% during the period. After doing some research on the company, I found some hidden gems within the company’s business.
Hidden gem #1
Source: Haw Par’s 2018 annual report
The above is a quick summary of Haw Par’s investments in listed companies in Singapore. What’s interesting to note is the performance of these investments over the years.
For example, its stake in UOB grew from S$85 million to S$1.8 billion, up 21-fold during its ownership period. Also, its UOL’s share price went up an astonishing 35 times its original cost.
Going forward, Haw Par will continue to benefit from the contribution of these two significant investments. Thus, it won’t be surprising for investors to see Haw Par’s shares tracking the stock performance of these two stakes.
Hidden gem #2
The second, and probably more significant gem (in my opinion) is the growing healthcare business under the Haw Par brand.
There are many things to like about this business. For one, it has been growing at a rapid rate in the last five years.
From 2014 to 2018, operating income from this segment has grown from S$33.9 million to S$77.3 million or a compound annual growth rate (CAGR) of 22.9%. Also, this segment generates a high return on equity of about 75% (2018 segment profit is S$77.3 million while segment equity is S$102.8 million).
I think this segment has significantly more room to grow, and will likely contribute more towards Haw Par’s future underlying profit.
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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. The Motley Fool Singapore has recommended the stocks of Haw Par Group Ltd and United Overseas Bank.