Hanwell Holdings: 40% discount to NCAV with promising growth

Since my previous post in November 2016, Hanwell Holdings has since plunged into deep value territory again. Its share price has been on a roller coaster ride – rising 63% from $0.245 to a high of $0.4 thereafter plummeting 50% to $0.205. There was no major announcement reported prior to the rally in 2017 and in Q1 2018, the company proposed to cut its dividend distribution by half, from $0.005 to $0.0025 per share. Shareholders were told that the group is embarking on a new investment, hence the need to retain more cash. Investors responded by selling off shares upon proposal and is currently trading at $0.205, it is a bigger bargain since I last wrote in 2016.

Has the business changed since then?

  • Revenue rose from $399.98 million in FY2016 to $464.02 million in FY2017, its Q1 revenue was reported at $119.27 million increased by 12.9% from $105.69 million in Q1 2017. This was mainly attributed to a stronger performance by Tat Seng Packaging, particularly from its China operations, which saw revenue growth of 35.9%.
  • Revenue from its packaging business contributed $302.9 million increased by 32% from $228.5 million in the previous year, while Consumer Businesses contributed $161 million decreased by 6%  from $171.4 million.
  • Revenue contribution by its China operations registered an increase of 35.9%, this was due to Tat Seng’s China subsidiaries being able to raise its selling price, especially for sales of corrugated board, in which the increased cost of raw material was pass on to its customers. Besides being able to maintain a healthy margin, sales volume has also appreciated.
  • Net operating income rose from $22.26 million in FY2016 to $25.48 million in FY2017, Q1 2018 NOI $5.19 million increased by 36.9% from $3.79 million in Q1 2017.
  • Total Assets rose from $485.23 million in 2016 to $540.34 million in 2017, increased by 11.3%. While total liabilities also rose from $162.86 million to $203.78 million, increased by 25%.
  • As at 31 December 2017, the Group maintained a positive cash and cash equivalents position of $135.0 million as compared to $170.9 million in FY2016.
  • Major shareholder Sam Goi, added approximately 6 millions in Q1 2018 with current holdings increased to 89.1 million shares (16.1% ownership).
tat seng.png
Tat Seng 5 year financial summary


Despite recovering economic climate, both Singapore and China’s operating environment are expected to remain challenging in light of recent trade war between China and US, volatility of raw material prices and the increasingly competitive environment in this industry. Although prospects for the fast-moving consumer goods (FMCG) industry remains highly competitive and saturated, the corrugated paper packaging products market was a major contributor of growth as demand rose.

The Group recorded revenue of $119.27 million in the first quarter of 2018 (Q1 2018), 12.9% increase compared to Q1 2017 performance. The increase was mainly attributed to stronger demand in Packaging Business (Tat Seng Group) and higher revenue achieved by Consumer Business in Malaysia due to new agency products.

Corrugated boxes are used in the boxes of various goods such as foods, beverages, cosmetics, pharmaceuticals, hazardous chemicals and other materials. Industry intelligence research provider, Reportbuyer suggests that growth of corrugated boxes market is influenced by the growing trend of the online shopping, rapid growth in the electronic sector and growing demand for product safety. The ease of online shopping such as faster delivery, easier return policies, and free shipping, have made many customers switch from the traditional methods of shopping. The strong consumer demand for high variety in products and the availability of different kinds of goods, together drive the growth of online shopping market.

Developing countries such as ChinaIndiaIndonesiaThailandVietnam, and Mexico have the largest disposable income, due to which there is a significant growth in the manufacturing and service industries. The higher disposable income in these developing countries, results in the increase in purchasing power. As a result, corrugated boxes market has been impacted, positively.

The global corrugated boxes market is expected to grow at a promising rate during the forecast period, 2017-2023. Asia-Pacific showing significant growth in the corrugated box market. In China, the food and beverage and the healthcare industries are the fastest growing industries that extensively use corrugated packages. The corrugated boxes market in the region is also growing with the growth of the processed food sector and the increasing demand for corrugated boxes by the electrical equipment and machinery manufacturers and suppliers.

Key Risks

Packaging business – its main driver of growth and increasing its contribution towards Group revenue, despite consistent 5 year performance from Tat Seng, Hanwell’s dependency on this segment for growth is risky.

FMCG business – gradually decreasing revenue contribution due to competitive environment, if cost is not passed on to customers, margins may be impacted due to increasing cost of commodities like rice and paper. Outlook expected to remain soft for the rest of 2018.

FX exposure – China might further devalue the Yuan to offset the impact of tariffs from the US. The RMB weakened by 3% against the SGD since announcement from US on import tariffs.

Remuneration –  it was reported in 2017, 2016 and 2015, the Executive Chairman, Dr Allan Tan and Executive Director, Dr Tang Cheuk Chee were richly remunerated despite the Group’s struggling performance.

Dr Allan Tan received:

2017: $1,639,000 (6.4% of operating income)

2016: $1,458,000 (5.7% of operating income)

2015: $1,342,000 (10% of operating income)

While Dr Tang received:

2017: $772,000 (3% of operating income)

2016: $711,000 (3.1% of operating income)

2015: $667,000 (5% of operating income)

Valuation, Financial Health & Peer Comparison

  • Strong cash position with 25.7 cents per share and Net Current Asset Value of 37.7 cents per share, against the current price of $0.205, presents 45% discount to NCAV.
  • Price to book value is 0.4
  • Enterprise Value/ EBITDA = 2.246
  • Long term debt to Long term assets: 4.3%
  • Current Ratio: 2.1

hanwell 1hanwell 2


Hanwell Holdings has been depressed since its proposal to cut dividends by half, currently trading at dividend yield 1.16%. The Group’s healthy balance sheet and attractive valuation makes it a bargain with promising growth from its packaging business. Key risk remains with the FMCG business, although most of its products are consumer staples, increase cost of raw agricultural commodities might impact margins. I do expect the FMCG segment to contribute less moving forward as the Group focus on expansion in the packaging business to capture growth in China and improve production efficiency.



The information contained in this website is provided to you for general information/circulation only and is not intended to nor will it create/induce the creation of any binding legal relations. The information or opinions provided do not constitute investment advice, a recommendation, an offer or solicitation to subscribe for, purchase or sell the investment product(s) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person or group of persons acting on this information. Investments are subject to investment risks including possible loss of the principal amount invested. The value of the product and the income from them may fall as well as rise.
You should seek advice from a financial adviser regarding the suitability of the investment products mentioned, taking into account your specific investment objectives, financial situation or particular needs, before making a commitment to purchase the investment product. In the event that you choose not to obtain advice from a financial adviser, you should assess and consider whether the investment product is suitable for you before proceeding to invest.
Any views, opinions, references or other statements or facts provided in this blog/website are personal views. No liability is accepted for any direct/indirect or any other damages of any kind arising from or in connection with your reliance on the information provided herein.



Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this:
search previous next tag category expand menu location phone mail time cart zoom edit close