Why Chin Hin Group Bhd Is Worth A Look For Investor

Meet Haw Choon.

In his teens, he dropped out of school, joined gang fights, and had spent 4 – 5 days in a police lock-up. To most who knew Haw Choon at that time, he was probably regarded as a kid who would never amount to anything in life.

But, God himself has a different plan for him.

His parents, Beng Teik and Mee Leng, had sent Haw Choon away from their home in Alor Setar to Singapore where he attended a simple study course to learn English and cut loose from a thug’s life. It was then, his tutors began to share the Gospel with Haw Choon which led him to receive Christ, a pivotal moment that sparked a true transformation of his life.

Haw Choon went back to school, finished college, and took over his father’s business in 2009. He transformed it from a family-owned enterprise with 70 staffs to among the top three suppliers of building materials in Malaysia that employs about 1,000 people. Haw Choon had listed the business under Chin Hin Group Bhd (Chin Hin) on Bursa Malaysia on 8 March 2016.

Today, Chin Hin is valued at RM 545.3 million in market capitalization. Haw Choon is now its Group Managing Director and is the 2017 winner of the EY Entrepreneur of the Year. He will be representing Malaysia to contest for the EY World Entrepreneur of the Year in Monte Carlo this year. Definitely, Haw Choon has become an inspiration to all.

Briefly, I’ll pen down 8 things that you need to know about Chin Hin before you invest.

#1: Stock Symbol

Ticker Symbol: KLSE: CHINHIN / KLSE: 5273
Market Capitalization: RM 545.3 Million (22 May 2018)

Share Price: RM 0.98 (22 May 2018)

Industry: Trading & Services

Syariah Compliant: Yes

#2: The Business

Chin Hin is involved in the following businesses:

1. Distribution of Building Materials
   It offers over 1,000 building materials to a base of over 4,000 clients across its 11 branches and 4 warehouses in Malaysia and Singapore. These materials include cement, concrete, steel, roofing, wood, brick, tile, paint, storage, and sanitary products. In 2017, this division made RM 623.1 million in revenues and RM 15.5 million in profits before tax (PBT).
2. Manufacturing of AAC & Precast Concrete Products
   Chin Hin manufactures Autoclaved Aerated Concrete (AAC) in its plant located at Serendah, Selangor through Starken AAC Sdn Bhd, its wholly-owned subsidiary. The plant has a production capacity of 600,000 cubic meters a year. In 2017, this division has generated RM 152.0 million in revenues and RM 22.1 million in PBT.
3. Manufacturing of Fire-Rated Doors
   In 2016, Chin Hin has acquired Midah Industries Sdn Bhd (Midah) for RM 14.5 million. Midah has a factory in Semenyih that produces up to 60,000 units of fire doors per year. In 2017, this division made RM 21.4 million in revenues and RM 3.7 million in PBT.
   
4. Manufacturing of Wire Mesh & Metal Roofing Systems
   Chin Hin manufactures wire mesh & metal roofing systems under Metex Steel Sdn Bhd (Metex), its wholly-owned subsidiary. In 2017, this division has recorded RM 121.2 million in revenues and RM 3.6 million in losses before tax (LBT). Its results were impacted by a hike in local wire rod prices after the imposition of duties and steel tariffs on imported steel wire rods by the government that has led to Metex incurring higher raw material costs during the year.  

#3: The Financials

Over the last 5 years, Chin Hin has made slightly above RM 1.0 billion worth of revenues a year. Out of which, it has made around RM 30 million per year in shareholders’ earnings. The exception was in 2016. Chin Hin has reported to make RM 41.4 million in earnings. This figure was inclusive of a fair value gain on investment properties of RM 10.6 million which is non-recurring and one-off in nature. Excluding it, Chin Hin would have reported profit at levels equivalent to RM 30 million in 2016.

Source: Annual Reports of Chin Hin Group Bhd

#4: Balance Sheet Strength

As at 31 December 2017, Chin Hin has reported to have RM 73.6 million in long-term borrowings. Thus, its current debt-to-equity ratio works out to be 18.43%. Chin Hin has also reported to have RM 47.1 million in cash reserves and a current ratio of 0.93.

#5: Future Prospects

Here are the key highlights of Chin Hin moving forward:
Order Book

As at 31 December 2017, Chin Hin has reported to have RM 497.29 million in order book. They provide visibility of income to Chin Hin for the next 12 – 18 months.

Starken AAC

Chin Hin plans to set up its second Starken AAC plant in Kota Tinggi in mid 2018. This would increase its AAC production from 475,000 cubic meters per annum to 1,075,000 cubic meters per annum.

Precast Concrete Production
In 2017, Chin Hin has rolled out three new plants located in Kulai, Bidor and Rawang that are capable of producing up to 300,000 metric tonnes of precast concrete products per annum. This would be further enhanced as it is now in the process of setting up a plant in Kota Tinggi which is capable of supplying a total of 45,000 metric tonnes of precast concrete products per annum.

Ultra-High Performance Concrete (UHPC)

On 12 October 2017, Chin Hin has acquired assets relating to the production of UHPC for RM 2.9 million. It commenced operations in November 2017. In mid-2018, sales are expected to grow in line with higher UHPC architectural solution projects commencing during the period.

Atlantic Blue

In August 2017, Chin Hin has acquired 45% stake in Atlantic Blue for a sum of RM 24.75 million. Atlantic Blue is a turnkey EPC solutions provider which is specialized in large-scale solar farming and solar photovoltaic solutions. In 2017, Atlantic Blue has secured a project to provide EPC solutions relating to the construction of a solar farm in Bukit Kayu Hitam, Kedah. This contract is in addition to two subcontract projects worth RM 34 million. They are solar farms located in Gurun, Kedah and Gambang, Pahang respectively.

#6: Valuation

As I write, Chin Hin  is trading at RM 0.98 a share.

In 2017, Chin Hin has reported earnings per share (EPS) of 6 sen. Its current P/E Ratio works out to be 16.33. In 2017, Chin Hin has reported RM 0.72 in net assets a share. Hence, it has a current P/B Ratio of 1.36.

Chin Hin has declared 3.5 sen in ordinary dividends per share (DPS) in 2017. If it is able to maintain its DPS at 3.5 sen, its expected gross dividend yields works out to be 3.57% if I invest in Chin Hin at RM 0.98 a share.

#7: Investors Relation

For further enquiries or to request for additional investment information on Chin Hin Group Bhd’s Investors Relation matters, you may contact:
Website: http://www.chinhingroup.com/investors-relations/

#8: Major Shareholders

As at 30 March 2018, the substantial shareholders of Chin Hin Group Bhd and their respective shareholdings are as followed:

 

– Divine Inventions Sdn Bhd: 42.94%

– Datuk Seri Chiau Beng Teik: 16.94%

– Kenanga Growth Fund: 2.26%

– Hextar Holdings Sdn Bhd: 1.74%

– Ng Beng Hoo: 1.59%

Note:

Datuk Seri Chiau Beng Teik, Datin Seri Wong Mee Leng and Chiau Haw Choon are substantial shareholders of Chin Hin Group Bhd through their interests in Divine Inventions Sdn Bhd.

Datuk Seri Chiau Beng Teik is appointed as Deputy Group Executive Chairman while Chiau Haw Choon is made Group Managing Director of the company.

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