Hanwell Holdings Limited - CGS-CIMB Research 2019-03-11: Everyday Essentials


Hanwell Holdings Limited - Everyday Essentials

  • Incorporated in 1974, Hanwell is an established consumer essential products manufacturer and distributor.
  • The company targets to expand its food business in Japan over the next few years, having acquired two buildings there.
  • Hanwell trades at a historical FY18 P/BV of 0.45x. It recently proposed a capital reduction of S$0.03614 per share and a final DPS of S$0.01.


  • Hanwell Holdings Limited (SGX:DM0) is an investment holdings company listed on the SGX. Its core business is in the consumer goods sector. This business unit operates via four key subsidiaries, Topseller Pte Ltd, Socma Trading (M) Sdn Bhd, Fortune Food Manufacturing Pte Ltd and Tipex Pte Ltd. See attached PDF report for the range of products manufactured and distrubuted by Hanwell.
  • Other than the consumer business, Hanwell also has a 64% stake in Tat Seng Packaging Group Ltd (SGX:T12) as at 13 Mar 2018.

Consumer Business

Topseller Pte Ltd

  • Topseller distributes and markets consumer products in both ambient and chilled categories. These include Royal Umbrella rice, Golden Peony rice, Gitangkim rice, Okome rice, Taj Ponni rice, Harmuni rice and oil, Golden Circle oil, Soyalite oil, Fortune Tofu and Noodles.
  • Topseller also partners with renowned international brands like GSK, Austasia, Pauls and Lion, distributing their products throughout its distribution network that spans hyper/supermarkets, grocery stores, caterers, institutions, ship chandlers, hotels, restaurants, food courts and hawker centres in Singapore. With the continual shift in consumer trend towards online retail, Topseller also works closely with online retailers to facilitate this business channel growth.
  • In 2017, Royal Umbrella continued to be ranked as the top-selling rice in Singapore for the 31st year, according to a Nielsen modern trade retail audit ratings. As a further testament to the brand’s distinct reputation, Royal Umbrella has been awarded the annual Reader’s Digest Trusted Brands for 14 years running (from 2004 to 2017) with the most recent award in 2017 being a platinum award. Topseller also successfully launched two new products – Taj Basmati rice and Origrain Healthy and Organic rice in FY17.

Socma Trading (M) Sdn Bhd

  • Established in 1989, Socma is the marketing and distribution arm of Hanwell in Malaysia. It is engaged in the distribution of a variety of products comprising confectionery, snacks, grocery and beverage, as well as toiletries. 
  • Socma also distributes coconut milk and soya sauce under the house brand Harmuni, which is mainly targeted at the Muslim community. Snack brands carried include TaoKaeNoi and Tai Sun and Meiji.

Fortune Food Manufacturing Pte Ltd

  • Fortune Food specialises in the production of soya bean-based food products like tofu and ‘tau kwa’ (extra-firm tofu). The food products are distributed under the brand names of Fortune and Sobe. 
  • Fortune Food also provides original equipment manufacturer (OEM) services in the form of pasteurised soy-based products for other third-party house brands.

Tipex Pte Ltd

  • Tipex manufactures and distributes tissue paper products in Singapore. For more than 30 years, Tipex has been producing consumer and commercial tissue paper products comprising household brands like Beautex, Mood, Hibis, Comfy and Parity. Besides this, Tipex also distributes a range of washroom hygiene products, including cleaning agents and dispensers, baby and adult diapers through brand names of PetPet, Fitti and Certainty, as well as household and automobile cleaning items via MR. CLEAN.
  • Tipex’s distribution network extends beyond Singapore and Malaysia, spanning across global markets of New Zealand, Brunei, Australia, Vietnam, Maldives, India and Egypt.
  • Beside focusing on production and distribution, Tipex has also been enhancing its marketing efforts to raise brand awareness. With the current retail trend moving towards e-commerce, Tipex has ventured into the online arena and provides a convenient 24-hour shopping experience and home delivery service.


Tat Seng Packaging Group Ltd


Five-year historical track record

  • Hanwell's revenue grew 8% y-o-y to S$502m in FY18 due:
    1. higher distribution sales in Malaysia arising from new agency products and more aggressive promotions and
    2. Tat Seng Packaging Group managed to raise its selling price and achieved higher sales volume.
  • Net profit grew 21% y-o-y to S$13.4m in FY18. Hanwell managed to reduce its operating expenses and benefited from an exchange gain of S$1.2m in FY18.
  • Based on its closing share price of S$0.235 on 7 Mar 2019, Hanwell has been trading below its net cash per share prior to FY17. See Hanwell's share price history.
  • In the past 5 years, Hanwell paid dividends each year except for FY14. 

What has changed?

Capital reduction and cash distribution

  • On 10 Jan 2019, Hanwell announced that it intends to undertake a capital reduction and return S$20.0m or S$0.03614 per share to shareholders. The rationale given was the company’s capital was in excess of its needs and a capital reduction would help improve ROEs.
  • In the coming months, Hanwell plans to convene an EGM to seek shareholders’ approval for the capital reduction.

Dividend raised by 300% in FY18

  • After the unexpected 10 Jan 2019 proposed capital reduction, Hanwell went on to raise its final DPS by 300% y-o-y from S$0.0025 last year to S$0.01 for FY18.

Looking to grow its food business in Japan

  • On 24 Jul 2018, Hanwell announced the acquisition of a property in Kyoto City to expand its food business in Japan. The development plan is to construct a boutique hotel with food and beverage outlets. Based on Hanwell’s announcement on 15 Jan 2019, development costs could be JPY170m and this project could be completed within the next 12-18 months subject to the relevant authorities’ approval.
  • This property is located in Gion, Kyoto’s tourist destination that offers ample lifestyle, food and beverage amenities. Strategically located, this property is in close proximity to well established shopping malls, restaurants and the Yasaka Shrine, also known as Gion Shrine, one of the famous shrines in Kyoto that tourists visit. Hanwell believes that this property has the potential to be a core investment of the Company.


  • Management expects profit margins in the consumer business to remain under pressure as the group is unable to pass on rising raw material costs, given that consumer sentiment is weak because the global economy is facing a low growth trend.
  • The packaging segment (under Tat Seng Packaging Group) is being hurt by the ongoing US-China trade tensions and Tat Seng Packaging Group plans to monitor its receivables collection and credit risk vigilantly. The new Nantong Tat Seng plant will commence operations in Mar 2019 and management believes this state-of-the-art plant could help strengthen its market share in the Nantong area.

William TNG CFA CGS-CIMB Research | https://research.itradecimb.com/ 2019-03-11
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