Apollo vs Hup Seng

Apollo vs Hup Seng

I must confess I loved this One Good “Seng” stock called Hup Seng Industries Berhad. Otherwise, it would not have been the number one stock I chose to feature in my maiden blog on July 21st 2013.

Every time I enter the supermarket or hypermarket with my spouse for shopping, my eyes will surely look out for the Hup Seng biscuit counter and observe the passing shoppers’ reaction when they are near the Hup Seng biscuit counter. Normally, there must be some shoppers picking up one or two packages of the biscuit!

The cream cracker biscuit (Hokkien people called it “kiam piah”  or salty biscuit) is a very big business fiercely fought amongst by the several biscuit companies in Malaysia. If you want to know how competitive it is, I can tell you that at the biscuit counter at one big hyper market in Penang, a potential cream cracker customer would be confronted by a big list of eye-cathing brands, i.e. Jacobs, Hwa Tai, Munchy’s, Tiger, Julie’s, Lee Biscuits and the hyper-market’s own-in-house brand.

Indeed it is remarkable for Hup Seng to do so well consistently during the last several years when one sees the very stiff competition the cream cracker biscuit business is.

On November 21st 2013, Hup Seng announced a Proposed Share Split and a Proposed Bonus Issue at a later date to be determined. This cash rich biscuit maker can afford to do so. The announcement has a big immediate impact on its share price the very next day. Investors chased after the stock after the opening bell on November 22nd and sent its share price to an all time record high of RM6.40 before profit taking set in to allow the stock to close at RM6.18.

Seriously, the writer was pleasantly surprised by this aggressive surging share price. After all, do you think honestly that a Proposed Share Split and a Proposed Bonus Issue really make a difference? I really don’t know. Maybe the investors know better than I do.

Well, Hup Seng isn’t the only consumer stock to enjoy the share price rally. Another quiet consumer counter, Apollo Food Holdings Berhad has also seen its sharing price rallying to new and newer highs every few days.

Regular readers would have noticed that Apollo was featured in my blog on October 7th 2013. At that time, the price was at RM4.80. Since then, it has appreciated by almost 15% to RM5.50 at the time of writing on November 27th.

Both these counters’ rally prompted the writer to make if possible a fair way of  comparing Apollo with Hup Seng. Can we really compare them? Apollo is obviously the King of layer cakes maker in Malaysia apart from its waffles and swiss rolls whereas Hup Seng is more famous for its delicious cream cracker.

If you want to know how popular the products of Apollo are, take a stroll to the supermarket/hyper-market to observe and you will find that Apollo’s products command a very big and premium space on the shelf compared to its competitors Oriental Food Industries from Melaka and London Biscuits Berhad.

Comparison of Apollo with Hup Seng

Anyway, I will try to make some comparison (although there will be readers who will not agree with me totally) in my personal opinion. There are four areas which I think is fair to be used.

Earning Per Share (EPS)

Apollo earned 40sen for its financial year April 2013 while Hup Seng earned 30sen for its financial year December 2012. If one is to use their latest quarterly eps, then Apollo’s current 1st quarter is 13sen while Hup Seng currently is 22sen, up to its latest 3rd quarter. On an annualised basis, Apollo’s eps would be 50sen plus compared to Hup Seng’s eps of 30sen.

Shall we say round one to Apollo?

Price Earning Ratio (PE)

Hup Seng is trading at around the RM6 level and with eps of 30sen, the PE is a high of 20. On the other hand, Apollo is trading at RM5.50 plus level and with eps of 40sen, the PE is only 14. If one is to use the Apollo’s 1st Qtr eps as a guide, the eps would be a conservative 50sen plus level and that would even lower its PE to only 11!

Round Two to Apollo again!

Cash Per Share

It would be more appropriate to use their latest quarterly results to calculate their current cash holdings and then divided by the number of shares issued.

As at July 31st 2013, being the latest 1st Qtr for financial year ended April 2014, Apollo holds cash of RM72 Million. (Trade and other receivables is RM38 Million while trade and other payables is only RM6.6 Million). Divided by its number of 80,000 shares issued and each Apollo share is backed by a cash per share of RM900.00.

As at September 30th 2013, being the latest 3rd Qtr for financial year ended December 2013, Hup Seng holds cash of RM85 Million. (Trade and other receivables is RM35 Million while trade and other payables is also RM35 Million). Divided by its number of 120,000 shares issued and each Apollo share is backed by a cash per share of RM700.00.

So from the above, while Hup Seng has more cash than Apollo, but it is the individual shareholder of Apollo who will receive more in the event both companies decided to pay out all their cash to shareholders (This is an unlikely event, though).

Can we agree that round three also goes to Apollo?

Dividends

Hup Seng paid a dividend of 30sen for its financial year December 2012. Apollo is paying 25sen dividend for its financial year April 2013. Hup Seng is paying 5sen more than Apollo.

So for dividends, my point goes to the cream cracker

biscuit maker, Hup Seng.

The final score is Apollo 3 Hup Seng 1

Perhaps if there are any readers who may feel it is not fair for me to compare the two companies in these ways, you are invited to email me back with your views and to be shared with other readers as well. I am very sure you guys out there will have your own ways of comparisons. Maybe even better than Kassim. Don’t keep it to yourself. Learn to be generous to share with others. The more we can share, the more we all can learn from each other.

Saying Goodbye to One Good “Seng”

Saying goodbye is sometimes very difficult, especially when our loved ones are going to overseas for a long period of time. But when it comes to investing in stocks, one must also not be too emotionally attached to have any sentimental feelings for a particular stock.

But I know I thing for sure, that is one must be brave enough to take profits at a certain time of their investment especially when the profits to be realised is more than 200%!

The writer said  goodbye to Hup Seng on November 22nd 2013 by selling his 3,000 shares at RM6.11. After deducting all the necessary charges, the net proceeds is RM18,195.52. Minus the original investment cost of RM5,717.71 gives a profit of RM12,477.81 and added in  total dividends of RM2,310.00 received, the total net profit is RM14,787.81. This is a return of over 250% for an investment period of 35 months!

Would you take this kind of profit if you were in my shoes?