Hai Leck is mainly known as a cash rich, EPC and maintenance service provider to the oil & gas and petrochemicals industries. While this core business segment has struggled in recent times, its lesser-known call centre business segment (under Tele-centre Services Pte Ltd) has recorded astronomical growth in FY ending June 2020, with segment revenues increasing from S$7mil to S$50mil and segment earnings increasing from S$1mil to S$7mil.
How does a call centre business with revenues of less than S$10mil per annum between FY17 and FY19 suddenly record such huge growth?
Disclosure from the company in the annual report has been highly disappointing. It almost feels like they do not want people to know.
Could this big spike have something do with huge amount of call centre outsourcing services by government agencies during the covid-19 period?
The strong call centre segment has allowed the company to record a net profit of S$4.1mil for FY ending June 2020 despite the weak oil environment. For the single quarter ending Sept 2020, the company recorded a net profit of S$3.8mil, almost the entire net profit of the entire previous FY.Hai Leck’s EPC and maintenance businesses, which used to be its bread and butter, recorded a segment loss due to slump in oil price and lockdown of dormitory for the FY ending June 2020.
With recovery of oil price and gradual resumption of construction work in Singapore, this segment could turn around and contribute positively to its earnings.Considering that the company has a bullet proof balance sheet, with S$89 million of net cash against a miserly market cap of S$100mil (as of Sept 2020), it makes the company’s omission of its 2020 dividends look highly suspicious given the strong performance of its call centre business. Hai Leck currently trades at 0.8x P/B, and ex-cash trailing P/E of 2.5x.
Hai Leck’s founder and Executive Chairman, Cheng Buck Poh, controls 85% of the company. He has been buying Hai Leck shares in the open market over the last two years (more during the March lockdown and most recently in December 2020) at the price range of S$0.48-0.52. It is also well known that his daughter, Cheng Li Hui, is an MP for Tampines GRC and was on the board of the company until 2019.
Why keep a company listed, not pay dividends, and not communicate properly about your businesses? This company, with its non-existent investor relations and lack of liquidity is better off a private family vehicle.
I couldn't believe my eyes when I saw the spike in its call centre revenue and profits, in sharp contrast to other businesses badly affected by the Covid.
I went to its facebook and found a post on 4 March 2020 that the call centre was hiring for part-term call agents. It is apparent that during early part of Covid they got big service contracts and were short of hands.
Hai Leck' call centres have very credible track record. They actually won government tenders for call centre services since 2015, from MOH, MOE, and People's Association.
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