Haw Par Corp Ltd - Healthcare Business - The Hidden Gem
- Once overshadowed by its size of its investment portfolio, Haw Par's healthcare business has grown rapidly in recent years to be a force to be reckoned with. The Group's healthcare products are primarily manufactured under the ‘Tiger Balm’ brand.
- Over the years, Tiger Balm has received multiple awards and honours and has become a household name in many countries. Leveraging on its strong brand name, Haw Par has introduced numerous product extensions to the Tiger Balm range, branching from its traditional ointment product to muscle rubs, plasters, back patches, mosquito repellents and neck & shoulder rubs.
- Healthcare division’s revenue and operating profit have grown at CAGR of 14% and 24% over the past five years, respectively.
- In the first nine months of 2016, operating profits grew 16% YoY to a record high of SGD46.6m, while profit margins expanded from 32% to 34.7%. We reckon healthcare business to be worth SGD 1.1bn based on a price earnings multiple of 20x.
- Adding its investment portfolio of about SGD2bn (primarily includes UOB, UIC and UOL shares), investment properties worth SGD211m and net cash of SGD253m to its healthcare business, we arrive at a fair value of SGD16.25 for Haw Par’s stock using a sum of parts valuation.
- Our TP of SGD11.40 is based on a 30% discount to fair value.
- At current price of SGD9.10, the stock offers an upside of 25%.