Hong Leong Finance (“HLF”) just released a horrendous set of FY2023 results. Personally, I thought that from the result announcement deck, one can already see the lack of efforts by the HLF presentation team. There were no powerpoint deck prepared like other listed companies to “beautify” their materials. The presentation team can’t even be bothered to put up a content page listing down the summary and page number of key financial reports (you can look at Haw Par Corporation- at least they bother to do a simple content page). Why I am saying this is that every job is a self-portrayal of one-self and one should always endorse it with excellence….this seems to give one a sense of the culture inside the HLF organization from the lack of further efforts in their basic presentation materials. Anyway, just my personal belief and impression.
Horrendous Set of FY2023 Results with Dividends Cut.
Now back to the FY2023 results discussion- please see screenshot extract below of the published materials:
Overall, profits for FY2023 attributable to shareholders dropped a whopping <28.7%> from S$ 131Mil in FY2022 to only S$93Mil. This is terrible given that the local banks such as DBS, UOB and OCBC are reporting record profits for FY2023. HLF interest income increased by a mere 68.8% but its interest expense increased exponentially by 286.4%!
Now, some folks will jump in and say that HLF cannot be compared to banks as it is a finance company. My point is simple, I will be better off investing my funds in the local blue chip banks rather than wasting the past year in HLF.
Another point is that the activities of HLF is a subset of what the banks provide- if management were to sell away their HLF business, the local banks will be potential bidders for it.
Parting thoughts
Let’s call a spade a spade. My personal thoughts are that HLF management team has performed badly as alluded to the FY2023 financial performance which is shocking. Their senior management should take a leaf out of Joseph Tsai’s book on what he had done at Alibaba, that is replacing the executive team of its various business units if the old ones are running out of ideas on staying competitive and growing the business. Alternatively, just sell off the business to the local or international banks to realize the net asset value per share of S$4.59 relative to its last market trading price of S$2.48 per share as at 29 Feb 2024.
(P.S: I have decided to sell off all my personal and family portfolios related holdings in HLF. Initially, I thought of going to the AGM to raise the above improvement points but based on my personal sensing of the culture in place, think it will be just a waste of my own time. So I voted with my own feet out of this disappointing investment foray into HLF.)
BFIRE here, commenting using phone, so via another account.
ReplyDeleteWell, as much as I'm biased because I'm an existing shareholder, HLF business is mainly in loans to sme, and to a small proportion, providing home mortgage loans. They do not earn from nims like the 3 banks... Comparing to other similar companies like singapura finance and Sing Investments, it's a similar picture. I would suppose an investor of HLF would know that it's very different from the banks.
Nonetheless I understand where you are coming from, personally I'm staying put for now, lol... Treating it like a bond, and if you look beyond last year's bountiful dividends and exclude it, the dividends are still increasing....
Still, all the best! 😁
Hi Barista Fire mate, thanks for dropping by. How have you been? :)
ReplyDeleteNo worries...I am ok with your comments. What I have expressed is my personal subjective view.
Anyway, the Net interest margin ("NIM") is a profitability indicator that measures the difference between interest income and interest paid out by financial institutions like HLF. Its business needs to attract customer deposits so as to generate income out from loans. Hence NIM is actually a relevant indicator for HLF too. Analyst report do mention NIM for HLF previously in their assessment.
HLF cost to attract and retain deposits for business lending use has deteriorated. Saying that, HLF does not have the full suite of services provided by a full banking institution hence as alluded to my post, I agreed fully with you that it cannot be compared on a perfect apple to apple basis from that perspective.
I just think (again personal view) that the management should just sell off HLF business to realise the significant market discount to NTA.