Haw Par Corporation

Link to long write-up: https://www.dropbox.com/s/tgbzuvpw7qnvi4x/Haw%20Par.pdf?dl=0

Short write-up

At $8.50 per share, Haw Paw is an attractive long opportunity to own valuable assets at negative implied enterprise value.

Summary:

1) Owns the iconic Tiger Balm brand which has a long growth runway and is able to
consistently earn significantly above cost of capital.
2) Concerns surrounding the Singapore oceanarium are exaggerated from a macro view
and the company has levers that it can pull to stem further losses.
3) Significant equity investments in Singapore and Hong Kong which value surpasses Haw
Par EV.
4) Owns several investment properties which have ascertainable value which generates
consistent FCF.

Market Capitalization: $1.86 billion
(+) Cash: $213.4 million
(-) Debt: $43.4 million
= Enterprise Value: $1.69 billion

EV/Core EBIT: 57x

From the standpoint of a typical investor, Haw Par would fall through most screening criteria:
high EV/EBIT and a deteriorating situation in a capital intensive segment. However, a simple
reading into Haw Par’s annual report would reveal the enormous hidden asset the company
owns.


SOTP Valuation:

Tiger Balm

High ROIC, long growth runway.

FY 2013 EBIT: $25.9 million

Using a DCF methodology, believes that on highly conservative assumptions, Tiger Balm is worth $283 million, or 11x EBIT.

Using general comparable methodology, Tiger Balm is worth $413 million, or 16x EBIT.

Using a closest comparable methodology, Tiger Balm is worth between 22x to 40x EBIT, or between $570 million to $1036 million.

I will use an average between a DCF approach and a general comparable approach to get a $350 million valuation, or 13.5x EBIT. But understand that on a closest comparable approach, Tiger Balm could easily be worth 2x as much.

Underwater World

Underwater World business can be split into two distinct geographically location with very different situation: Singapore and Pattaya.

Singapore UWW business is dying but Pattaya is thriving.

The market seems to be valuing the UWW segment on a whole and failed to realize that the UWW Singapore lease is due in three years. Management could shut down operations and stem losses easily.

While a SOTP on the UWW segment is ideal, it is extremely hard to de-consolidated this business. Instead, I will use an extreme worst case DCF scenario to arrive at the fair value.

Using a worst case DCF approach, I value the UWW segment at a negative $40 million.

Equity Investments

Haw Par owns many listed equity securities such as UOB and UOL.

The value of Haw Par equity holdings is worth $2.3 billion, 50% higher than Haw Par's current market capitalization.
This is where the bulk of Haw Par's value is derived upon.

Investment Properties

Haw Par owns several real estate with a value from external valuer at ~$220 milion.

Using my own conservative assumptions, I value this to be $145 million

Sum of the Parts