‘Hup Seng a gem to dividend-seeking investors’
KUCHING: Hup Seng Industries Bhd (Hup Seng) has been dubbed ‘a gem to dividend-seeking investors’ but other analysts are retaining a cautious singledigit growth in financial year 2019 (FY19) premised on slightly better margins.
In its outlook on Hup Seng, TA Securities Holdings Bhd (TA Securities) was optimistic about the group’s effort in broadening its distribution networks and product innovation to keep the company competitive in the market.
“Moreover, the endeavour to rationalise its operations shall keep the company’s operating expenses at a manageable level,” TA Securities said.
“We reckon Hup Seng to be a gem to dividend-seeking investors who also expect ringgit weakness.
Based on the research firm’s sensitivity analysis, if the ringgit weakens from RM4.05 per US dollar to RM4.15 per US dollar, Hup Seng’s earnings are expected to improve by circa two per cent, ceteris paribus, considering 30 per cent of its sales come from exports.
On a side note, TA Securities increased its dividend expectation of FY19-20 to sixsix sen from five-5.5sen.
Meanwhile, AmInvestment Bank Bhd ( AmInvestment Bank) recapped in its latest company report on Hup Seng that margins were wobbly throughout the year and generally below the previous year’s, as the group still had to devote a substantial amount to incentives and promotional costs.
“The usual boon seen by Hup Seng in the final quarter was constrained by the impact of the weaker ringgit on exports and high marketing costs,” AmInvestment Bank observed.
“Core net profit in the fourth quarter (4Q) was nine per cent lower year on year (y-o-y) on the back of a flat revenue.”
The research firm believed the single- digit growth in domestic sales especially is a welcome change, but the group still struggles to reap the benefit from this amid high operating costs and marketing expenses.
“We retain a cautious singledigit growth in FY19 premised on slightly better margins from better cost management, expansion of its products and distribution network.”