Saham: KLSE-XINHWA - PT. Xin Hwa Holdings Berhad

TRANSACTIONS (CHAPTER 10 OF LISTING REQUIREMENTS) : NON RELATED PARTY TRANSACTIONSXIN HWA HOLDINGS BERHAD ("XHH" OR "COMPANY")
ACQUISTION OF FACTORIES BY MICRON METAL ENGINEERING SDN. BHD., A SUBSIDIARY OF THE COMPANY (ADDITIONAL INFORMATION)

Xin Hwa in RM14mil Johor factory buy

PETALING JAYA: Xin Hwa Holdings Bhd’s 79% owned subsidiary, Micron Engineering Metal Sdn Bhd, has entered into sale and purchase agreements with Wiley Development Sdn Bhd, to acquire two units of 1½-storey detached factories in Ulu Tiram, Johor for RM14mil.

TRANSACTIONS (CHAPTER 10 OF LISTING REQUIREMENTS) : NON RELATED PARTY TRANSACTIONS [XINHWA]

TRANSACTIONS (CHAPTER 10 OF LISTING REQUIREMENTS) : NON RELATED PARTY TRANSACTIONSXIN HWA HOLDINGS BERHAD ("XHH" OR "COMPANY")
ACQUISTION OF FACTORIES BY MICRON METAL ENGINEERING SDN. BHD., A SUBSIDIARY OF THE COMPANY

Changes in Director's Interest (Section 219 of CA 2016) - MR NG AIK CHUAN [XINHWA]

Changes in Director's Interest (Section 219 of CA 2016) - MR NG AIK CHUAN

Change in Boardroom - MISS TEO SIOK KEE [XINHWA]

Change in Boardroom - MISS TEO SIOK KEE

Quarterly rpt on consolidated results for the financial period ended 31/03/2023 [XINHWA]

Quarterly rpt on consolidated results for the financial period ended 31/03/2023

Changes in Director's Interest (Section 219 of CA 2016) - MISS TEO SIOK KEE [XINHWA]

Changes in Director's Interest (Section 219 of CA 2016) - MISS TEO SIOK KEE

$HARBOUR / 2062 (HARBOUR-LINK GROUP BERHAD) – Proxy to Intra-Asia Trade with Strong Net Cash Position

Preamble:
As the world ever slowly shifts and inches away from western dominance globally, there has been increasing talk on the East as the up and coming world economy leader, with ASEAN as the next major economy. Recent newsflow has also been talking a lot on the rise of BRICS nations and a separate currency used for cross border trade other than the USD for countries within the region.

Whilst this (global currency) is probably still premature, and today we’re not going to particularly focus on this topic, it just illustrates that this side of the world is doing not too bad thus far.

ASEAN economy has remained relatively robust, with most countries here reporting good trade numbers so far.

How could one benefit from growing ASEAN trade against a backdrop of a potential global recession?

“The lifeblood for any economy lies in logistics”, or so says Wyckoff (paraphrased).

I’ve been ruminating on this in between work; and today I’ll share a bit on Harbour, which caught my eye when looking at companies operating in the logistics space from their latest QR.

***Written by terence775, purely for sharing purposes only and not to be taken for financial advice in any way. ***

Overview:

Harbour is a logistics company mainly doing both marine and land logistics. Other businesses include engineering and property division, which are both somewhat small today. They differentiate themselves from other logistics companies in BURSA by having their own shipping vessels, and are not just a land logistics player or freight forwarder. They have a solid net cash position of about 70-80% of market cap and strong FCF generation. They are also focused on Intra-Asia and Malaysian trade. Recently have been stepping up their dividend payments too.

Business Segments

Shipping and Marine Division
Harbour operates a container shipping liner service within the Malaysia and Intra-Asia Market, with 12 container vessels and total carrying capacity of 6,100 TEUs. For those not in the industry, TEU stands for Twenty-foot container Equivalent Unit; as the most common container type used for shipping is the 20-ft container.

They have presence in every calling port across Peninsular and East Malaysia, Singapore, Brunei, Hong Kong and China. Basically their vessels service these ports of calling and facilitate trade between them.

They also operate tugboats and barges, mainly for sea transportation of timber products for Vietnam, Philippines, and Thailand. To this end they have 3 sets of tugboats and barges.

To round it off, they provide ship agency service; which basically handles the regulatory side of things for ship clearance, handling of goods, loading and unloading cargo, ship maintenance and repairs etc.

The shipping and marine division is their mainstay; and whilst around the world shipping rates are dropping, local shipping has remained relatively stable. Malaysia’s strong trade numbers have also shown resilience, and it’s reflected in their strong earnings so far.

If prices are favourable, they may acquire new vessels and equipment to grow this segment further.

Integrated Logistics Division
Harbour can also handle land logistics to form an end to end logistics service to their customer. This makes it easier to send goods door-to-door without having to deal with so many different parties.

For haulage activities, they do have a set of trailers, prime movers, cargo lorries, and dump trucks that operate within Sarawak, Sabah, and Labuan.

Lastly, they are also able to do project cargo, which are typically specialized logistics solutions for huge, non-standardized items. (more info about project cargo logistics can be read from my post on $XINHWA / 5267 (XIN HWA HOLDINGS BERHAD) last year: https://cutt.ly/X74CMP2 )

With the rising developments in East Malaysia, Harbour guides that they are seeing increasing activities to their integrated logistics division and expect continued positive performance.

Engineering & Property Divisions
They take EPCC works mainly for O&G industry. This division has been relatively small, but they foresee an uptick in projects soon. For property, nothing substantial but they do have 90 acres of industrial land for potential future developments.

Geographical footprint
Harbour mainly operates in and around Malaysia, with their next largest market being Hong Kong and China (about 30% of sales); with no exposure to Europe or the Americas. Very intra-asia focused.

Shareholding
The management, via their investment vehicle Enricharvest & United Joy, together hold around 65% of the company.

Samarang became a substantial shareholder since 2022, and they have been buying up the shares of the company up until Jan 2023, holding approx. 6.4% of the company currently.

Taking both into account, the free float is less than 30% of their 400mil NOSH, which makes it quite illiquid. That being said, in recent days, the 5 market depth has sufficient liquidity if anyone wants to enter or exit with reasonably large position.

Positives:
Balance sheet strength is great. It is very “cheap”. Harbour has very high net cash and FCF generation. Ability to pay bumper dividends, if desired. Hardly any debts. If their strong performance is able to be maintained, their net cash will be more than their market cap soon. NTA stands at RM 1.73.

Proxy to Asia trade. Management guided increase in lifting volumes and bookings with stable freight rates, especially after mid-February.

Proxy to developments in East Malaysia. Domestic trade has stable volume and stable rates, and the FDI / focus on developing infrastructure and large projects in East Malaysia should see domestic demand remain stable.

Engineering division may rebound. Management guided new projects are under tendering and “we shall expect some good news soon”.

Scarcity premium? As far as I know, there isn’t another company like this on Bursa; most of their peers are either very heavily indebted or do not cover the whole supply chain like they do.

Increasing dividend payouts. Harbour has been very conservative about managing their cash, but a good sign is that over the past few years management has shown willingness to increase their dividend payouts. It’s more than supported by their core profits, with payout ratio of only ~15% so far.

Property arm with 90 acres of industrial land in Tj Kidurong—perhaps something could materialize here.

Risks
Lower sulphur emissions requirements for their fleet, potentially larger capex spending here to upgrade or OPEX to purchase low sulphur fuels.

If they buy new vessels, that will eat up their cash hoard. Then, it may not be such a “value” buy anymore. (Could be a good thing, depending on your stance.)

Old management. Most of them are quite senior (not necessarily a bad thing), but there’s always a question on succession or concerns on the direction if new blood takes over.

Lack of visibility/certainty on future earnings. While earnings have been good, there’s no clear visibility on the sustainability of their earnings especially if the world goes into a recession. It could take a hit, although so far the reported numbers have been good.

Potentially worse QoQ report coming, due to long holiday seasons as guided from Dec to Feb. Depending on how the market reacts to it, there might be a negative share price movement.

Lack of coverage. For better or for worse, the company doesn’t really have much media presence, and there are currently no analysts covering them either. Management also doesn’t seem to bother trying to reach out to the investing community, which could be viewed as a positive too, depending on your perspective.

Peers
$SYSCORP / 5173 (SHIN YANG SHIPPING CORPORATION BERHAD) – Another Sarawak-based shipper and shipbuilder, also net cash. Market cap much larger than Harbour, but not sure why. Earnings are more or less comparable, balance sheet & cash flow is weaker.
$SWIFT / 5303 (SWIFT HAULAGE BERHAD) – Highly indebted; mainly focuses on container haulage and warehousing.
$FM / 7210 (FM GLOBAL LOGISTICS HOLDINGS BERHAD.) – Freight forwarder; they don’t own any vessels, also in minor net debt position.

Closing thoughts:
An investor is an optimist—the longer I’m in the market, the more I find that saying to be true. As much as doom and gloom makes the headlines, the world continues on.

I think this seems like a relatively low risk preposition even if the world does slowdown and goes into a recession; backed by their strong net cash position, this should ease the downside somewhat.

Thanks for reading to the end!

Let me know what you think—am I missing some major risks? Is there a reason the company has such low valuations?

XINHWA

Xin Hwa Holdings Berhad

Company Background