As a diversified conglomerate with its fingers in many pies, Hap Seng Consolidated Bhd’s earnings growth over the years has been remarkable. While other plantation and property players may have struggled with weak crude palm oil prices and property sales last year, Hap Seng reported stronger earnings not only in these divisions but in all its other divisions as well.
Hap Seng’s net profit has grown from year to year on the back of higher operating profit across core operations for its six divisions, namely plantations, property investment and development, credit financing, automotive, fertiliser trading and building materials.
The group’s profit after tax grew to a record high of RM1.103 billion in FY2017 from RM1 billion in FY2016 and RM908.47 billion in FY2015. Against PAT of RM753.46 million in FY2014, Hap Seng chalked up a compound annual growth rate of 13.6% over the three-year period.
The group’s PAT in FY2017 was partly boosted by bigger one-off gains. One of its notable non-recurring gains came from the disposal of its logistics arm, Hap Seng Logistics Sdn Bhd, for RM750 million, which represented a price-to-book ratio of 2.98 times for the unit. The group used the proceeds to pare down debt.
The sale was made to LSH Logistics Ltd, a unit of Hong Kong-based Lei Shing Hong Ltd, a subsidiary of which had bought into another division in Hap Seng. In May this year, the conglomerate announced that it would divest a 20% stake in Hap Seng Credit Sdn Bhd as well as dispose of its financial services unit, HSC Sydney Holding Ltd, to Lei Shing Hong Capital Ltd.
The conglomerate’s annual revenue has also grown by leaps and bounds in the period under review, from RM4.39 billion in the financial year ended Dec 31, 2015 (FY2015), to RM4.89 billion in FY2016 and to an all-time high of RM5.29 billion in FY2017.
The group’s consistent upward earnings trend has enabled Hap Seng to impress its shareholders with double-digit growth of return on equity over the three-year period under review. Hap Seng, which is also a major shareholder of Hap Seng Plantations Holdings Bhd, achieved ROE of 21.41% in FY2015, 18.23% in FY2016 and 19.15% in FY2017.
Between June 30, 2015 and June 29, 2018, Hap Seng’s share price more than doubled to RM9.85 from RM4.70. The stock has since appreciated further to an all-time high of RM9.98 on Nov 16.
Hap Seng also marked a new milestone as one of the country’s largest distributors of Mercedes-Benz vehicles in FY2017. In June last year, it unveiled a RM53 million autohaus in Kuching, Sarawak, for Mercedes-Benz Malaysia Sdn Bhd (MBM), the first integrated one-stop centre for the marque in Sabah and Sarawak.
The group further strengthened its position as an automotive player this year by acquiring MBM’s commercial vehicle general distributorship business, making it the sole general distributor of Mercedes-Benz and Fuso commercial vehicles in Malaysia.
The conglomerate has continued to show growth in sales and earnings this year, raking in a 2.2% increase in net profit year on year to RM798.67 million in the first half of FY2018 on the back of a one-off gain from its disposal of HSC Sydney. revenue over the six-month period grew 23.1% y-o-y to RM3.06 billion.
Hap Seng’s stellar earnings performance has helped propel its share price to a record high. The share price has soared 115% from RM4.46 on June 30, 2015, to RM9.603 as at end-June 2018. Consequently, the conglomerate’s market capitalisation ballooned from RM10 billion in FY2014 to RM23.77 billion in FY2017.
The climb has continued since then. It hit another high of RM9.85 on Dec 13 for a market capitalisation of RM24.5 billion.