Hafary Holdings

[ValueMushroom]

188 lots : )

[secretinvestors]

My answers are actually indicated by my vested interest : )
144lots bought for this transaction : )

Need to highlight this is for value trading, didn't analyse in details whether it is a value stock for long term holdings.

Ok got it. For me, since there's some remaining shares on hand after acceptance of offer, I would be slightly more careful about the fundamentals since there might be some chance that I have to hold on to it for an extended period of time. If we take our position at around $0.21, the net effect after the offer would mean the average price bought to be around $0.18 which is near the 52 week low of $0.175. PER at this price would be about 9-10x which seems quite reasonable.

<vested but small amounts>

XE today. If i'm not wrong, those who buy Hafary now can't participate in the partial offer. I've sold about 25% of what I have yesterday @ $0.225 for a quick 5.5%+ profit in 14 days. Although not a lot but reasonable considering the short time period and the certainty.

For those who bought it, what actions did you take and what options will you be taking with regards to the partial offer? Would be keen to know and learn from you guys

[ValueMushroom]

Wow great. Good money in such a short time.

I intend to fully accept the offer and sell the remaining units when it goes higher : )

[Kelvin]

i have odd number of lots

[ValueMushroom]

Checked my account yesterday, money from the offer has come in : )

[tobias_i_d]

is this counter still a good buy? no volume for the last few days....

[weijian]

Hafary, a retailer (and recently also becoming a distributor/manufacturer) of surface finishes like ceramic tiles, stone finishes and wood vinyl etc, has an interesting asset, business and structure (ABS):

Asset
- The immediate thing noticeable for all OPMIs would be its gearing of ~200%. Is this a feature or a bug?

- Since its executive office holders are closely related to Oxley, and son (now NED) is DCEO of Oxley with his buddy Ching, asset heavy rather than light, is probably a feature than bug.

- A summary of the balance sheet --> ROU (leasehold properties)/PPE/investment property~210%, net working capital (almost all inventories)~70%, associate~10%, cash~10% = Total 300% of equity is balanced out by 200% gearing.

- With the a profitable vietnam associate and also the classification of some of its properties under ROU/PPE, there is definitely hidden value beyond what the accounting value suggests. But unfortunately, its properties are mission-critical to their business.

Business
- Their end customers can be the big property developers, construction main contractors or up to the smaller ones like ID firms or even DIY individuals.

- Covid-19 pent-up demand has been a strong tailwind - as property construction and renovations drive its business. In essence, its business is dependent on the property activity in Spore. But compared to property developers and/or agencies, there seems to be a time lag --> Property sales are recorded 2-3years before actual work (eg. installation/renovation) is done. As such, while property agencies like Propnex had their profitability peaking in FY20/21/22 (with FY22 aided by resales), Hafary's profitability has been on an upward rise since FY22. It remains to be seen how long it will continue on beyond FY24?

Structure
- Hap Seng Consolidated Berhad (a Msian investment holding company) has been 51% shareholder since 2015 as documented earlier in this forum. HSCB is family owned but not family operated. The controlling family is estimated to be on the Top20 richest in Msia, with HSCB 1 of the 3 holding companies it has. In FY23, HCSB had sold ~30mil of stuff to Hafary (which makes up ~25% of COGS) through its wholly owned subsidiary Msia Mosaic. The payable receivables profile of Hafary suggest that Msia Mosaic is not undercutting Hafary in terms of collecting its invoices from Hafary.

- The next biggest shareholder is Founder Low's son - Low See Ching, also the capable DCEO of Oxley owning ~25%.

- Founder Low, as the 3rd biggest shareholder at 8%, has the executive function as been the CEO of Hafary.

- So, the 2 biggest shareholders HSCB (51%) and Mr Low See Ching (25%) are not holding any executive positions. Maybe this is why we are seeing Hafary giving out pretty generous dividends in the last 2years (FY22/FY23) as business improved?

[weijian]

After ceding a controlling stake to Hap Seng Consolidated Berhad (HSCB), a Msian conglomerate in 2015 (at 24cents), the Low family (as Offerer) is back with an intention to delist their baby at 64cents. HSCB will accept the offer and Offerer already has 89.96% of irrevocable undertakings before the OPMIs decide. So it is almost a certainty that they will hit 90% (the min free float to keep itself from been suspended).

I took an in depth look at Hafary in early 2024 but finally did not take any action (to buy), as I was not sure which part of the property cycle we were in and so didn't want to end up on the wrong end. I certainly wasn't expecting the Low family to buy back from the Msian tycoon family.

OFFER ANNOUNCEMENT

The Offeror will make the Offer for the Offer Shares at the following consideration: For each Offer Share: S$0.64 in cash (the "Final Offer Price").

The Final Offer Price is final and the Offeror does not intend to revise the Final Offer Price, save that the Offeror reserves the right to do so in accordance with the Code in a competitive situation.

The Offeror intends to make the Company its wholly-owned subsidiary and does not intend to preserve the listing status of the Company. Accordingly, the Offeror, if and when entitled, intends to exercise its right of compulsory acquisition under Section 215(1) of the Companies Act and does not intend to support or take any step (including the placing out of Shares by the Offeror) for the public float to be restored and/or for any trading suspension of the Shares by the SGX-ST to be lifted in the event that, inter alia, less than 10% of the total number of Shares are held in public hands

https://links.sgx.com/FileOpen/Offer_Ann...eID=905193

P.S. As usual, the share price started "rising" a few weeks before the announcement was made.

[specuvestor]

Certainly an unusual and uncommon twist on the Structure level.

Means Msia Mosiac will reduce supply of COGS to Hafary over time? But guess we will never know if pte ltd.

[weijian]

Structure
- Hap Seng Consolidated Berhad (a Msian investment holding company) has been 51% shareholder since 2015 as documented earlier in this forum. HSCB is family owned but not family operated. The controlling family is estimated to be on the Top20 richest in Msia, with HSCB 1 of the 3 holding companies it has. In FY23, HCSB had sold ~30mil of stuff to Hafary (which makes up ~25% of COGS) through its wholly owned subsidiary Msia Mosaic. The payable receivables profile of Hafary suggest that Msia Mosaic is not undercutting Hafary in terms of collecting its invoices from Hafary.

Hi specuvestor,

The RPT was 30mil in FY23 but reduced subsequently to 12mil and 0.6mil in FY24 and FY25 respectively.

Hafary have their own 65% owned manufacturing subsidiary (International Ceramic Manufacturing Sdn Bhd, ICM), that was first consolidated in 2022. ICM leased plots from Msia Mosaics (MMB) to do its manufacturing, selling to Hafary and also 3rd party local markets. Hafary's own annual reports also revealed that MMB charged employee costs to ICM as well.

It remains to be seen whether this relationship will under ravel itself. My guess is probably not (and it is a wild guess because I don't follow HSCB).