Hong Leong Industries - what is the plan?

 

Looking at the latest quarterly results of HLI and an interim dividend of 17cents (similar to last financial year), as a shareholder of HLI I am happy and at the same time disappointed. Happy the company is doing reasonably well this quarter, seems recovering well from the pandemic as compared to last quarter and with 17 cents dividend, no complain. 

However, when I look closely at the financials, I am disappointed why this big fat cash cow not distributing more dividend to shareholders as the cash reserve is almost Rm4.15 per share (half of market cap). If it maintain the same dividend as last year which was at 42 cents, yield based on share price of Rm8.2 is around 5%. Though its not too bad but the huge cash reserve has brought down the ROE as company has not been investing the last few years hence no profit growth the last 3 years. 

From what I heard about Hong Leong Group, the expectation from the big boss is high and one needs to perform and deliver in order to stay in the position. So, what is the plan for HLI?

I have been telling my myself be patient in investing and stay with good companies, but more often than not, controlling shareholders show no sympathy when they see its time to harvest - privatize it at a low price when market is bad. HLI is likely a candidate for such action as it is 76% controlled by him.

So what can we, the tiny shareholders do to ask for better return or ensure a fair deal if it is privatized? Literally not much we could do. What happened in HLCapital's failed privatization is an exception rather than the norm. There is a influential shareholder with a sizeable holding and managed to pull other shareholders to make up more than 10% of shareholding in total to fail it. When I look at HLI's top 30 shareholders, the 2nd largest shareholder ( a mutual fund) only has less than 2%. Not likely to have a champion if there is a poor privatization offer for HLI.

What my frustration is - being loyal and patient not necessarily be rewarded by controlling shareholder, and the opportunity cost could be very high. Finding a good company , buying at good price and selling at good price not only required patient but also luck. That luck is sometimes in the hand of the controlling shareholder. Well, looks like I could only pray if still decide to cruise along with HLI.