Posted by: donmihaihai | April 9, 2011

Haw Par Corp

Total number of shares in UIC = 67,558,000
Total number of shares in UOL = 41,428,805
Total number of shares in UOB = unknown

Total available for sales financial assets as at 31/12/10 = $1,574,861,000
UOL share price 31/12/10 = $4.75
UIC Share price 31/12/10 = $2.50
UOB share price 31/12/10 = $18.20
UOL + UIC = (41,428,805 X 4.75) + (67,558,000 X 2.5) = $196,786,824 + $168,895,000 = $365,681,824

Estimated Interests in UOB = (1,574,861,000 – 365,681,824)/18.20 = 66,438,445 shares
% of total number of shares = 66,438,445/1,560,139,000 = 4.26%

It is widely speculated that Haw Par Corp owned about 4% of UOB. Haw Par hardly trades any of its AFS so it looks like the speculation is true.

Haw Par Corp total number of share = 197,879,654
Haw Par Corp share price ~ $6.00 ($6.09 as at 08.04.11)
Market Capitalisation = $1,187,277,924
Discount to AFS = 1,187,277,924/1,574,861,000 ~25% or 0.75

UOL share price as at 08/04/11 – $4.96
UIC share price as at 08/04/11 – $2.82
UOB share price as at 08/04/11 – $19.52

Point #1 – Buying Haw Par Corp at $6 is a cheap way to buy UOL, UIC and UOB at 25% discount of their current quoted prices. In addition to that, operating businesses(Tiger Balm, Underwater World and Some properties) and Hua Han Bio-Pharmaceutical are free. These operating businesses are not small and could easily worth more than $500 million.

Point #2 – Valuation of UOL, UIC and UOB.

UIC NBV = $2.71.
25% discount of $2.50/$2.71 = 0.69 NBV

UOL NTA = $6.05.
25% discount of $4.75/6.05 = 0.59 NTA

UOB NBV = $12.51
25% discount of $18.20/12.51 = 1.09 NBV

The easy way to look at Property Company is NBV. Add in some foreseeable future profit, RNBV can be calculated as well. But these calculations don’t really say much about how the company is being run. From the way UOL and UIC are being managed, their NBV does not have that kind of bubble like features. As for UOB, I am not sure. It is a well known, well research company with ROE at low teen for past 5 years. Buying at about 1.1X NBV can translated into 10% yield.

But the market is not efficient. Or just that for a company like Haw Par Corp that hold minority shares in Listed companies of related company, with no intention of selling them, there should be a “discount” on its share price. What more minority shareholders can be screwed by control shareholder.

I like stock in this kind of situation. It is cheap and anyone who know it, acknowledge it is cheap base on valuation. As for being screwed by control shareholder, it remain to be proven as far as I know. Anyway for Wee to control UOB, UIS, UOI, UOL, Pan Pacific, UIC, Singland, Haw Par and UOB Kay Hian plus other companies, he must be at least fair to a number of parties to have executives running the ground and supporting him.

At $6.00, return from operating businesses will be around 3%, assuming return from UIC and UOL to be 7% of their equity while UOB at 10% then return on will be at the range of 13% to 15%. The businesses in Haw Par Corp include outstanding businesses like Tiger Balm and Underwater World that have problem growing and average businesses in bank and property that has all kind of opportunities to grow.


  1. […] I was alerted to this from donmihaihai's blog (h/tip to him) as well as his very instructive reverse-calculation of Haw Par's share of UOB. Interesting to note that Haw Par's share of UOB has actually increased from FY2009 (which means […]

  2. For whoever that come in from Ryan Goh link, here is my cold water.

    1) Haw Par took shares instead of cash is not speculation. It is a fact as shown in annual report for anyone who care and able to read financial statements.

    2) There is no rule that says “Haw Par Corp will close the gap between share price and NBV in 6 mths, 1 yr, 2 yrs or 3 yrs.”

    If I remember correctly, Haw Par Corp has been trading below NBV for years, perhaps for last 10 yrs. So if this is about probability, I would never want to bet against history.

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