Stock Review – HIGHTEC(7033)(KUMPULAN H&L HIGH-TECH BERHAD) -2

Bursa Malaysia - 7033

Bloomberg - H&L:MK
Yahoo - 7033 .kl
Webpage - http://www.hlhightech.com/

Company Profile

HIGHTEC specializing in the innovation of plastic injection mounting solutions; which are in Automotive, Consumer Goods, Electrical, Industrial and Medical.

1) Operating Segment

HIGHTEC has four major operating segments which are:

1) Manufacturing & Trading – 70.73 % of 2018 revenue

2) Property Development – 11.22 % of 2018 revenue

3) Plantation – 9.63 %  of 2018 revenue

4) Investment – 8.42 % of 2018 revenue

Asset turnover of the operating segments are:

1)  Manufacturing & Trading – 0.39

2) Property Development – 0.51

3) Plantation – 0.28

4) Investment – 0.02

Investment segment is having the most of non current asset gain for 2018 which is 77.49 % of the non current asset gain.

CONS:

è The lowest asset turnover ratio segment having the high non current asset gain.

2) Geographical Information

HIGHTEC is operated in three major location which are:

1) European countries – 49.64 % of 2018 revenue

2) Malaysia – 45.96 % of 2018 revenue

3) South East Asia – 2.72 % of 2018 revenue

4) Others – 1.67 % of 2018 revenue

Financial Statement

The Investment Properties had increase from RM 55,016,281 (2017) to RM 55,845,731 (2018),of the increment RM 765,550 (92.30 %) are from fair value adjustment.

Of the RM 3,054,727 trade receivables, RM 1,679,230 (54.97 %) are trade past due compared to 38.74 of the trade receivable past due in 2017.

HIGHTEC had increase in cash and deposit with licensed financial institutions from RM 16,000,377 (2017) to RM 17,616,060 (2018), 10.1 % increase.

PROS:

è HIGHTEC had 10.1 % increase in cash and deposit with licensed financial institutions.

CONS:

è 54.97 % of trade receivable had past due

HIGHTEC borrowings had reduced from RM 4,747,845 (2017) to RM 3,575,397 (2018), 24.69 % decrease.

There is significant increase in deferred tax liability from RM 4,257,925 (2017) to RM 6,126,376 (2018), 43.88 % increase. These increase in deferred tax liability is due to increase of fair value gain on investment properties from RM 1,451,907 (2017) to RM 2,980,814 (2018). If the investment properties is sales next year HIGHTEC had to pay the deferred liability.

PROS:

è HIGHTEC loans and borrowings had reduced by 24.69 %

CONS:

è Deferred tax liability had increase by 43.88 % mainly due to increase of fair value gain of investment property.

Financial Ratio

Description	2018	2017	Different
Gross Profit Margin	0.40	0.38	+0.02
Net Profit Margin	0.15	0.25	-0.10
Interest Coverage Ratio	32.58	28.78	+3.79
Effective Tax	0.47	0.20	+0.27

HIGHTEC increase of effective tax because of additional of deferred tax liability on real property gain which is RM 1,528,907. If the figure remove HIGHTEC effective tax rate is 23.63 %.

Warrant

HIGHTEC had no warrant.

Dividend and Bonus Issued for the past five year

HIGHTEC had constant dividend for the past five year from 2014 – 2018 with the average dividend of RM 0.033 with the dividend yield of 2.34 % base on HIGHTEC stock price of RM 1.28 on 15/3/2019.

CONS:

è HIGHTEC had dividend yield of average 2,34 % for the last five year which is lower than fixed deposit rate of 3.15 %

Estimated Price

IVKLS Price : RM 1.25

Peers

1) SCH

2) PNEPCB

3) HLT

4) KEIHIN

5) WONG

6) SANICHI

7) JASKITA

8) PASUKGB

9) YBS

10) MQTECH

Summary of Stock Reviews

Stock Review – HIGHTEC(7033) (KUMPULAN H & L HIGH-TECH BERHAD )

Bursa Malaysia - 7033

Bloomberg - H&L:MK
Yahoo - 7033 .kl
Webpage - http://www.hlhightech.com/

Key Value Investor Criteria: -

Description	Value	Criteria	Point
Price to Tangible Book Ratio	0.57*	< 1	5/5
Stock Valuation	CAPM => 2.94% Return (2008-2014) =>2.12 % Overvalue by 0.82%	CAPM < Return	0/5
Return on Asset	2.16*	> 0	3/5
Return on Common Equity	8.56*	> 0	5/5
Quick Ratio	4.67*	>1	4/5
Long term Debt / Total Capital	8.35*	<50%	5/5
Continue Dividend over Past 10 Years / Since Inception	Yes	Yes	2/2
Cash From Operation	Positive > 5 years	Positive	5/5
Total Point			29/37

Note:

 *            Data obtain from Bursa Marketplace on 14/11/2015

By scoring 29/37 (78.38%), we will look into the annual report and the latest quarterly report of HIGHTEC before making the decision to buy the stock.

Company Profile

HIGHTEC has four major operating segment which are:

1. Manufacturing and Trading (23.44% of 2014 profit)
2. Investment (72.56% of 2014 profit)
3. Plantation (-4.12% of 2014 profit)
4. Joint Property Developer (8.12% of 2014 profit)

1)   Manufacture and Trading

HIGHTEC start with manufacturing precision engineering plastic mound and precision metal product in 1976 under the name of Hup Lee Enginnering Work. HIGHTEC now operating in three location, two in Sungai Buloh Malaysia and one in Thailand.

HIGHTEC has serves into various industries such as Automotive, Electrical, Industrial and Medical. HIGHTEC has their product export to various country such as Australia, China, Indonesia, Japan, UK, US and etc.

2)   Investment

This division is where HIGHTEC got most of their profit from in 2014 (72.56%). This division rent out factories and warehouse to others.

HIGHTEC has five number of factory units in Taman Mayang and one number of warehouse in Shah Alam are currently rented out.

3)   Plantation

HIGHTEC start into palm oil plantation in mid 2013 where they signed rental agreement with various native to convert the land in Bintulu Sarawak into oil palm plantation.

The rental agreement allows HIGHTEC to use the land rental free for three and the half year from execution of the rental agreement which mean until 2017 for 60 years.

Some of the oil palm tree starts bearing fruits since first half of 2015.

4)   Joint Property Developer

In 2014, HIGHTEC has 3 plot of lands held for property development which are one in Ipoh and two in Kuala Selangor.

In 2014, this division just got the revenue from the 66 units of houses sold.

PROS:

The depreciation of Ringgit Malaysia might increase the profit of HIGHTEC due to foreign currency exchange gain. Rent our factory units and warehouse space will be passive income for HIGHTEC which the management able to use to cover the operating cost of HIGHTEC. Some of the oil palm tree start bearing fruit since first half of 2015.

CONS:

The Automative industry may slowdown next year which might affect the revenue of HIGHTEC

Financial Statement

By looking at the quarterly report for the period ending 31 JULY 2015 HIGHTEC has low amount of borrowing RM 7,224,000 compared to their cash equivalent in hand which is RM 15,070,000. Besides that the operating cash flow also increase compare to the previous year.

PROS:

HIGHTEC had low amount of borrowing. Increase operating cash flow.

Summary of Stock Reviews