Hanwell - Aug'18

 

Hanwell announced their Q2'18 report on 10th Aug, below are some highlights captured from the report.

Consumer Business: +4.47% in 2Q18 (+4.22% 1H18) mainly due to higher distribution sales from Malaysia. Distribution in Singapore is actually lower compare to last Q due to close down of the retail shops (how come i not aware this??), actually not much info about Singapore retail market. Growth in Malaysia market is kind of good new, however, there is a risk of RM running weak, so lets see the performance for the next report. Comment on overall consumer business was highlighted as below: Price hike of rice is beginning to stabilize especially from Thailand and Vietnam. Forward purchase planning in this segment will be essential to sustain current gross profits till end of the year. Price hike for both pulp and recycled paper for the paper products has stabilized. However, margins in this sector are under pressure due to retail price increase lagging behind raw materials cost increase. So the blame goes to price of raw material.

Packaging Business: +30.5% in 2Q18 (+24.6% 1H18) nothing special as the growth are expected to be coming from China operation. looks good but need to note of some key point mentioned by Alan:

1. Singapore’s operating environment is expected to remain challenging for the Packaging business segment with the increase of raw material costs in anticipation of unfavourable exchange fluctuation of SGD against USD and the volatility of raw material prices.
2. For China's operations of the Packaging business segment, the escalation of trade tension between US and China will impact its export. This will further aggravate the over-capacity of corrugator packaging industry and lead to more intense competition of the industry.
3. Also in China, the stringent pollution control regulations of China government
4. The potential of unfavourable exchange fluctuation of RMB against USD will result in increase in raw materials costs.

Notwithstanding this segment will continue to execute its strategy to improve operational efficiencies and further reduce costs diligently. The Packaging business segment is expected to commence the operation of its new production line of Nantong Tat Seng in the fourth quarter of 2018.

While for the financial statement, below are some highlights for me to take as notes:

• Property, plant and equipment written off was not there last year
• Inventory is higher, the explanation is last year inventory low due to peak season in Dec'17 - Wah! like that also can!
• Net cash generated from operating activities is actually lower in 2018 ya!

As summary, Hanwell still running fine with some white spot here and there. The share price never move a lot after this report, so definitely this is an boring counter, also there is where to find a net - net stock. The purpose of investing in Hanwell is to have capital growth, and that should come from the share price movement, so far i still haven't see any solid movement despite they reported kind of "good" result in 2Q. Despite the RM would likely continue to go weaker based on current trend and a lot of uncertainty of the trade war between China and US, overall Hawell still have his business under good control. I will keep Hanwell for awhile until end of the year,