My Blog
Hong Leong Finance
By Derek  •  June 13, 2007
By: Derek Lim From UOBKH "Acquiring a portfolio of hire-purchase agreements HLF has reached an agreement to acquire a portfolio of 10,300 hire purchase agreements from the Singapore branch of a foreign bank at a consideration of S$405m, subject to closing adjustments at the completion date. The acquisition is expected to be completed on 12 Jul 07, and be funded by a combination of internal resources and short to medium term bank borrowings. Prior to this announcement, we have been forecasting Dec 07 loan book of S$7.1b. With this acquisition, we are now forecasting loan book of S$7.4b. The acquisition will enable HLF to increase its net interest income. In FY06, HLF recorded net interest margin of 2.3%. Using the same net interest margin (which we view as conservative), a S$405m portfolio can generate additional annual net interest income of S$9.3m. For half a year (since acquisition will be completed in Jul 07), the additional net interest income accounts for 2.5% of our revised FY07 net interest income. Although the direct impact may be marginal, we believe HLF could leverage on the additional customer base to cross-sell other financial products. Acquisition prospects remain. HLF’s NTA is S$3.24ps. Our S$5.00 price target is based on 1.6x P/NTA. We believe HLF is an attractive acquisition target by QFBs as well as China banks which want to expand their operations in Singapore. As OCBC paid 1.8x P/NTA for Keppel Capital Holdings and UOB paid 1.6x P/NTA for OUB, we feel that our price target of 1.6x P/NTA is fair. HLF also attractive due to its Section 44 tax credits which could translate to more special dividend payout." I got this from Channel News Asia Forum (link). I'm a UOB Kayhian customer but I have not receive such reports before - must be because I'm a small fry. Anyway, being a HLF share-holder, I'm delighted with the news. However this might not translate in a surge in price as shown today - up by 0.5%. Their S44 credits is indeed attractive and I'm actually tempted to buy another lot today but I decided not to. Instead of giving dividends, HLF might issue rights to finance this acquisition.
Read the full article
By Derek
Derek is an investor who follows Peter Lynch style of investing. He prefers to use simple and straight forward information for stock analysis. He started with the intention to bring together all bloggers and professionals who are interested or already in the area of Finance and Investing, and to create a community where everyone is free to write and to share their articles, experience and opinions.

Your email address will not be published.


Your Email Address will not be published

Read More Articles
More from thefinance