HLIND

Long Term Charts 

Here's what I'm looking at with HLIND over the past 25 years.

Massive Net Cash

There's no question that HLIND business is a cash generating machine.  HLIND grows its Net Cash at the rate of 33% per annum CAGR compounding.  This is a crazy company!

The value of the Net Cash is nearly RM5.  The stock trades at RM9.40.   The rest of the business is only sold for RM4.40, which is cheap considering 1 year EPS is typically around 90 sen or thereabout.  Doesn't take much to realize there's massive value there, as the business is only sold for a P/E of less than 5 times.

Summary Financials

Since 2015:

1. Dividend growth is impressive with CAGR of 8.8%.  That is very nice.

The only time when it lowered dividend is during COVID pandemic year in 2020 - that is understandable.

2. EPS growth is generally growing.  Which is nice.  

It is more volatile than dividends which is normal.  

CAGR of 6.4% is decent, but not great, as it is dragged by the high cash balances.  Not efficient capital management.  

This type of cash hoarding raises eyebrows.  It is not normal professional business decision, but likely a strategic decision by Quek for something else that we don't know.   A non-zero risk is that it may not be for HLIND benefit per se if one goes by history, but I really have no clue what he is thinking.

3. Average Dividend Payout ratio is nice, around 60% - that's almost the sweet spot.

One time in 2017, it earned less but chose to raise dividends - I like this kind of dividend management.

However, given the huge growth in cash balance, if it does a regular Special Dividend, then, I would give top marks for Dividend management.  However, it hasn't done this and is really long over-due given how much that Cash Balance has grown.  Hence, it's not run as professionally as I like, but it's not a strong complain.

4. This business is under-valued (except for the high Net Cash).  The business is available for a low P/E of 5 (excluding Net Cash), when it grows Net Cash at 33% CAGR.   Clearly under-valued.

Market Response to this Rising Cash

Up to 2020, the fast rising Net Cash coincided with stock price rising massively.
But market is forward looking.  When COVID pandemic came, market already anticipated a fall, long before the fall actually happens.

My Investment Thesis

The best investment thesis jumps out at you, and HLIND certainly jumps out.

1. HLIND Dividend yield is attractive - the yield is double FD rate.  No complaints here!

2. HLIND stock is under-valued.  

3. A must own stock for long term dividend investors.  If earnings grow, dividends grow.

4. Own it when it is cheap.  This reduces your odds of losing.  Remember Buffett rule.

5. I would like this company to do more with the Cash Balance i.e. give back to shareholders because it is not natural to hoard for 8-9 years or longer.   After 3 years, one should already start thinking about Special Dividends, unless it has plans to use this, but this company is not very transparent, leading to questions about whether Quek has his own plans for this cash that is outside/may not necessarily benefit HLIND shareholderss (one would argue that if so, he would have already gave to shareholders via higher dividends, but chose not to do so).  At the very least, it should explain, give a bit more transparency, rather than leading investors to speculate.

6. So, it's not a question of not owning but how large a size.

7. If neutral position size is 3% capital, then, this one to be safe is maybe around 3% capital.

Reason to position higher = the Triangle Consolidation - something is about to happen in the next 1-2 years.

Reason not to position higher = Can you really trust Quek given if he really cared about shareholders, why aren't him sharing more of the RM1.6 billion cash over the past 8-9 years?  What if the triangle consolidation breakout is to the downside, after Quek does something else?

Remember Buffett Rule No 1 - Not lose money.

Never let Greed decides.  Stay professional, be rational, investment is best done when it is most business-like.