A value stock – Keong Hong Holdings Ltd

If you’re a regular reader of Miss Niao, then you probably know that I know nuts about buying stocks. Wait a minute… On second thought, “nuts” could be an overrated word to use. I contemplated for some time on publishing this blog entry because it is my first time performing an analysis of a stock, and I don’t wanna screw up by saying something silly. :/

Now that I’ve finally decided to do it, my only hope is that I would be able to gain more insight through any comments on this article.I am always searching for new perspectives and I’m crossing my fingers that this blog would be able to bring me that. In fact, it already did with some of my other articles where my readers would provide some input from time to time. And I’m glad to know that I’m not just talking to myself 100% of the time. :p

I have recently got vested into my very first non-ETF, non-REIT stock. It took me some courage and really shaky fingers to press the “Order” button on my computer screen. I’ve read the annual reports time and time again. I’ve convinced myself that it is a value stock, and I am hoping that I turn out lucky.

So here goes. This is my analysis as to why Keong Hong Holdings Ltd is a value stock.

Financial ratios

  1. Price of share vested at $0.485
  2. Earnings per share (EPS) of 13.02 cents
  3. Price-to-earning (P/E) ratio of 3.73
  4. Price-to-book (PTB) ratio of 0.81
  5. Current ratio of 1.86
  6. Net gearing at 45.16%
  7. Return of Equity (ROE) at 24.12%
  8. Return of Assets (ROA) at 3.91%
  9. Dividend yield of 6.8%

Other observations:

No record for deficit of earnings ever since listed in Dec 2011. Revenue has been decreasing since the past two years, and so has net income. It is interesting to note that in 2015, although the dividends distributed was 4.5 cents which was the highest among the rest of the years, the payout ratio was a mere 10.7 due to a huge influx in earnings from their completed projects.

Steady increase of share price ever since listed, however volume of stock is a lot lesser than other more “popular” stocks. In terms of P/E ratio and dividend yield, both surpass their competitors in the Construction & Engineering industry. Debt is concerning but has been decreasing for the past 2 years.

Company Analysis

The nature of Keong Hong Holdings’ business revolves around providing construction services in both private and public sectors for residential, commercial, industrial and institutional projects. They also invest in property and hotels locally and overseas. Some of their major customers are Keppel Land Group, Fraser Centrepoint Limited and MCL Land.

According to the statistics provided by BCA, the forecasts show relatively slow growth for the construction sector. This has also been addressed in their annual report that they intend to increase their portfolio for their properties and hotels to form up to half of their income to overcome the cyclical nature of their main business.

The company has been transferred from Catalist to the Mainboard of SGX during August 2016 which serves to be assuring.

During March 2017, they have acquired Nuform System Asia Pte Ltd which was owned by Ho Lee Group initially. I couldn’t find much information about it because its website isn’t up yet. I was even more surprised to find that my Chrome window showed that the Ho Lee Group’s website (click with caution) contained malware. :O All that I know is that it provides aluminium formwork for the construction industry, which is a service that is related to Keong Hong’s core business.

On April 2017, they have also been awarded a $214.2 million contract for the building of Seaside Residences by East Vue Pte Ltd.

Oh, not to forget, a bunch of other awards worth checking out here.

Overall thoughts

Ratios look very in favour of bringing a bargain at the current price. I think their business is easy enough for me to understand, and I see that they are making effort to try to diversify their business.

I personally like the management too because they consist of experienced people who have been in the industry for a significant amount of time. The tone of their annual report is cautious and humble.

One concern that I have is their intention to continue boosting their investments into the hospitality industry which is also cyclic by nature (?) puts some doubts in me. Nevertheless, I’m gonna go ahead and put my trust in the company. The fundamentals look very sound to me at the moment and I’m hoping that this is a counter that I can hold for some time.

Now, I can officially say that I am a (very, very, very small) company owner!!! Hooray! ^_^

Some other information which I’ve found, in case you might be interested in getting vested into the stock yourself:

*Official* Keong Hong thread

10% per annum stock analysis for Keong Hong Holdings Ltd

Keong Hong Holdings – Undervalued?

I hope this article was useful for you and please do provide your comments if you think that I made any mistake in the above analysis. I have so much more to learn!

Thanks for reading!

Miss Niao xoxo

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Author: missniao

Hello! I blog about financial matters and things that average people can do to have a better retirement. I want to inspire people to take control of their money and have a better understanding about it. If you are interested to know more, follow me @ missniao.wordpress.com! :)

8 thoughts on “A value stock – Keong Hong Holdings Ltd”

      1. Coincidentally, I did check it out a week ago. Hehe.
        I haven’t done my homework for this counter yet. Maybe it’s time I did :p
        Just a quick question – how do you define your financial metrics? Would love to know if they correspond with my methods.

        Like

      2. When it comes to numbers I look at gross, operating and net profit margins, free cash flow, gearing, ROE (I break this down into 3 components using the DuPont formula to see what’s behind a high number) and ROIC.

        I’m still learning though! Which metrics do you look at?

        Liked by 1 person

      3. Pretty much the same as you, and with the addition of projected future earnings for the calculation of margin of safety. Hope we’re on the right track!

        Like

  1. Hi MissNiao, warrior here again. Thanks for the comprehensive analysis and congrats on your first stock purchase. I am a bit surprised that your first investment is a SME and not one of those blue chips. You are probably looking for an undervalued firm. The tendency is that those blue chips are so well researched and attract so much institution interest that they are probably fully valued. By the way, out of curiosity, are you investing in Keong Hong for growth or income?

    Liked by 1 person

    1. Hello Warriortan, thanks for dropping by again ^_^
      You are right. It is hard to find a good price for most of the blue chip stocks now. Also, I had to remove REITs from the equation as well because I can’t seem to be able to convince myself that they are cheap enough at this current moment.
      I did consider certain drawbacks for investing in Keong Hong as a SME as you mentioned, but I am still too new to really justify if my considerations are valid. I guess only time will tell.
      As to your last question, if I were to pick one, it would probably lean towards “income”. 🙂

      Like

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