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Friday, February 19, 2016

Hupseng: Eat Your Biscuits!

Background

Hup Seng Industries Bhd ('Hupseng') is involved in the manufacture and sales of biscuits, confectioneries & other foodstuffs.

Recent Financial Performance

For QE31/12/2015, Hupseng's net profit rose by 33% q-o-q or 22% y-o-y to RM15.4 million while revenue increased by 24% q-o-q or 9% y-o-y to RM80 million. The improved performance was attributed to higher biscuits sales in domestic and export market.

 
Table: Hupseng's last 8 quarters result

Historical Financial Performance

Hupseng's top-line and bottom-line as well as its profit margins have been in a slow & steady rise for the past 8-9 years.


Chart 1: Hupseng's last 8 quarters' P&L  

Financial Position

Hupseng's financial position as at 31/12/2015 is deemed healthy with current ratio at 2.5 times while total liabilities to total equity stood at 0.5 time. The company has no borrowing. Instead it has cash of RM120 million or RM0.15 per share.

Valuation

Hupseng (closed at RM1.32 yesterday) is now trading at a PER of 19 times (based on last 4 quarters' EPS of 6.84 sen). If the cash in hand is deducted from the share price, the PER would be lowered to 17 times. At this PER, Hupseng is deemed fairly valued.

Last year, Hupseng paid out dividend totaling 4.5 sen in 3 tranches. So far, it hd paid out dividend totaling 4 sen in 2 tranches this year. If it pays out a final dividend of 2 sen (equal to each one of the last 2 tranches), then Hupseng's DY would be a decent 4.5%.

Technical Outlook

Hupseng is in an intermediate uptrend line, with support at RM1.25. That uptrend line stretches back all the way to 2008 when it was trading at a low of RM0.05!! Since it has come a long way, the market is waiting for a compelling fundamental reason to buy into the stock. In the absence of a compelling reason to sell, the share price would likely to keep drifting higher.


Chart 2: Hupseng's weekly chart as at Feb 18, 2016 (Source: ShareInvestor.com)

 
Chart 3: Hupseng's monthly chart as at Feb 18, 2016 (Source: ShareInvestor.com)

Conclusion

Based on good financial performance, healthy financial position & positive technical outlook, Hupseng is a good stock for long-term investment. Good entry to the stock is when the share price drifts down to the uptrend line, currently at RM1.25.

Note: 
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Hupseng.

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