95 - Harrisons
- The King of dividends
The trading house division is one sector I have always like to pay attention to it especially every reporting session of each quarter. The recent closing Financial Year 2016 for the three main listed players : DKSH Holdings (M) Bhd, Harrisons Holdings (M) Bhd and Yee Lee Corporation Bhd. is one I like to compare each other with particularly their earnings and how much dividends they reward their respective shareholders.
These trio of companies more or less are agencies that are mainly involved in distribution of products produced by all those multinationals companies in Malaysia and also from other parts of the world.
All these companies continued to do well in Financial Year 2016 despite the tough challenging marketing environment. Worse still, the weakening ringgit did not help at all and resulted in dearer imported goods for an already subdued consumer market.
Nevertheless, these three companies still posted profits that are considered commendable in such trying times. DKSH, Harrisons and Yee Lee recorded earnings per share of 32.01 sen, 29.75 sen and 23.78 sen respectively for Financial Year 2016.
Despite the tight close range of their earnings between 23.38 sen to 32.01 sen, their share prices differ as much as a RM1 range. Currently Yee Lee is traded at RM2.73 while Harrisons is at RM3.87 and the biggest brother DKSh is at RM4.75.
If one is to use Price Earnings ratio as a comparison, then DKSH, Harrisons and Yee Lee is trading at PE of 15, 13 and 11.5 respectively. At this juncture, using PE as a gauge, Yee Lee is considered the cheapest of the trio while DKSH is considered the most expensive while Harrisons stand in between.
But using PE is just a figure guide and not a realistic one. In investment, one should look beyond the PE guide and in this instance, DKSH must have the better growth prospects (in the eyes of investors) in years to come, hence the higher PE accorded is fair and justified.
There are also reasons why Yee Lee is accorded with the lowest PE. Admittedly Yee Lee's business is not as much as DKSH and Harrisons and as such might need to consistently maintain such yearly earnings in the longer term to convince investors to invest.
Traditionally all these three companies continue to be consistent dividends paymasters over the years without fail. While DKSH has consistently maintained its 9.5 sen dividend for the last three years, Yee Lee has slowly inched up its dividends from 3.5 sen for Financial Year 2014 and 2015 and raised it to 4.5 sen for Financial Year 2016.
Harrisons which has been consistently paying 15 sen dividends from Financial Year 2012 to 2015 were expected to declare the same amount for Financial Year 2016. But instead declared an above expectation dividends of 25 sen which surprised many investors including yours truly. I have to say such nice kind of above expectations surprise dividends announcement is definitely a wonderful dose for the days.
Such high dividends is amounting to almost 85% of its 2016 earnings. A check on its financial statement revealed a rather healthy balance sheet for Harrisons ended December 2016.
Harrisons has a total of RM520 million (Inventories RM181 million, Trade & Other Receivables RM242 million and Deposits RM97 million) against RMRM300 million (Trade and Other Payable RM175 million and Borrowings RM125 million).
Assuming Harrisons chooses to liquate its business totally (sorry, this won't happen at all, this assumption is just used as a calculations basis only), then there is a positive figure of RM220 million. When one considers Harrisons has only a share base of just 68,476.00, it literally translates into a possible RM3 for each share.
Regular readers would have recalled Harrisons is one stock I have written several times (you can termed me as a "Harrisons Crusader", ha ha).
My first posting was on April 11, 2014 titled : Harrisons - The Kingpin of East Malaysia and the second one on Nov 11, 2014 titled : Harrisons - The Kingpin Strikes Back. My latest posting about Harrisons was on Oct 8, 2016 titled : Harrisons - A stable high dividend yield stock.
Its consistently good dividends (rising in tandem with its earnings as well) over the decades has prompted me to add Harrisons into my long term portfolios of dividends-paying stocks. So far its dividends payout has not disappointed me at all.
Even if the share price maintains its RM3 to RM4 range over the next several years together with its just conservative dividends of 15 sen, I would be more than happy enough than ever.
My total 15,000 shares of Harrisons (especially the 10,000 shares bought on Dec 7, 2004 and the subsequence purchase of 3,000 shares and 2,000 shares years the last few years) remains one of my core holding portfolios investment which I can classified as BORING INVESTMENTS but profitable ones.
Well, dividends lovers, the ball is in your court now.