Hafary

UOB KAY HIAN today : "We initiate coverage on Hafary Holdings (Hafary) with a BUY recommendation and a SOTP-based target price of S$0.66, implying a 36.1% upside from the current price. Strong construction demand is likely to boost future earnings. Valuation is backed by a portfolio of industrial buildings held at low cost on balance sheet. Any plans to unlock hidden value of the property portfolio may be an upside catalyst for the stock, in our view.

 Strong construction demand to boost project demand.
The Housing Development Board (HDB) has been increasing
its housing supply, introducing 25,000 Build-to-Order (BTO) flats in 2012 and 2013. As one of the major suppliers of tiles in Singapore, Hafary is likely to benefit from the strong housing demand. In 1HFY13, Hafary started to supply to a number of new BTO flats.

 Hidden value in industrial properties. Hafary currently
owns four leasehold properties that are held at cost on
balance sheet. Using valuations based on recent resale
transactions, we derived a fair value of S$60.2m for Hafary’s four leasehold properties. The derived fair value is S$13.8m (S$0.06/share) higher than the book value in its balance sheet. A near-term upside catalyst may emerge if Hafary enters into a sales-and-leaseback agreement or a direct sale that could unlock the hidden value of its industrial properties.

 Another bumper dividend? Hafary recognised a one-off
gain of S$23.8m (S$0.11/share) from the sale of its
development property. Consequently, it announced an
interim dividend of 2.5 S cents for FY13. Given the surge in revenue and adjusted net profit for 1HFY13, we believe there is still room for more dividends. For FY12, Hafary announced a dividend of 2.5 S cents. With FY13 capex investment forecasted to moderate, the company is able to return excess cash to reward shareholders, in our view.

 Foreign investments - an additional driver of revenue
and earnings. Hafary has a 45% and 49% interest in Hunan
Cappuccino Construction Materials (HCCM), a tile
manufacturing facility in China, and Viet Ceramics
International Joint Stock Company (VCI), a tile distributor in Vietnam, respectively.

We see these two overseas investments as positive moves by the company to diversify their revenue stream out of Singapore. Vertical integration through the investment in HCCM enables Hafary to secure its tiles supply and possibly improve margins, while investment in VCI allows Hafary to tap into one of the fastest-growing economies in the world.

I am told that stock split for Hafary is possible (at below 50 cents) because Hafary is a Catalist stock not subject to all the same rules as Mencast, a Mainboard stock.

HAFARY should adopt an alias name -- Hongbao King.

I got 2.5 c dividend in 1H2013 (July - Dec 2012). Hafary giving another interim of 1.5 c on issued shares after the stock split (2 shares for 1 share).

Effectively, the dividend is 3 cents a share on the pre-split share capital!

If you read UOB Kay Hian report I posted earlier in this thread, the analyst already got big hint of the second interim dividend. Hehehe....

kiasu wrote: Wht u r so happy? There r so many in history that pays such dividents n go busts shortly. I wish u r blessed but pse tell us why. Thk you.

I understand your caution. I too am surprised that Hafary is so goood. Just my luck, maybe.

For those who have not been following Hafary.

Its year-end is June. Current stock price is 19.1 cent (down from 25 cents post stock-split)

At interim, Hafary paid 2.5 cents a share (before stock split).
At 3Q, it paid 1.5 cents a share (post stock split).

(Stock split: 1 share became 2 shares).

Investors who got into the stock early have already collected very high dividend yield.

4Q results coming in a few months' time : I am expecting a final dividend.

This is a generous dividend paying company -- why not, when the controlling shareholders own a very large percentage of the company.

Recently, there was a huge volume transacted in 25th June, which is the work of some big boy buying back their shares that was placed out (total of 40k lots post split was placed out by UOB Kayhian prior to the mainboard listing, refer to Feb 21st announcement by Hafary).

What do you think they will do with the close to 40k lots of Hafary shares? I think they will push the price up when market recovers so that they can offload at a high price.

If u look at the buy queue, there is always a few thousands lot queuing at 17 to around 18 cents everyday.

And I think further down the road, Hafary will have some co-operate action with Oxley as both are closely linked.