The Value Of Chuan Hup Holdings Ltd

I have been looking for a counter to reduce my almost 30% of cash holding.

Thus, an interesting counter stands out from the list of companies in my portfolio.

That is Chuan Hup Holdings Ltd (CH).
Chuan Hup Holding Logo
Over the last few months, CH share price has been hovering around and above 30 cents. I have been thinking of adding more of CH into my portfolio and have been rather reluctant because my average share price was much lower.

However, a meet up with Simple Investor reminded me about Warren Buffett’s quote - “Price is what you pay, but Value is what you get.”

Therefore, I decided to look at the valuation of CH before deciding further. In my view, CH should be consider from a book value perspective rather than earnings or DCF perspective. This is because it act more like an investment firm due to the associate and subsidiary it has invested in. Hence, I settled on a “Sum of All Parts” calculation for CH.

From CH's 2017 annual report, it owns the following:

 - 76.17% of PCI Ltd (PCI) (Subsidiary)
 - 19.7% of Finbar Group Ltd (Finbar) (Associate)
 - 35.5% of Pacific Star Development (PSD) (Associate)

All other assets are deem to be fully owned by CH. Do note that CH also own Keyland Ayala Properties Inc (formerly known as Security Land Corporation), but this is actually located under available for sales investment. So I will not be calculating it separately.

Do also note that only PCI financials are incorporated into CH Group financials. Therefore, its asset and liabilities will be deducted from CH Group financials. Associates, which consist of only Finbar and PSD, will also be deducted from CH Group financials.

The 3 companies will be calculated separate based on their market cap.

Based on the ownership and market cap as of 16 March 2018, CH ownership of the following companies will translated into the following:

PCI – 76.17% x S$169.234 million = S$129.802 million
Finbar – 19.7% x A$223.232 million = A$43.293 million => S$44.3 million
PSD – 35.5% x S$109.925 million = S$39.023 million

Based on the CH and PCI financials ending Dec-17:

Calculation of Sum of All Parts

As per the above calculation, the value of each share is 44.8 cents.

After giving it 20% discount, CH will be valued at 35.8 cents.

I believe giving discount is important in the current market because it is still on a bull run. With so much uncertainty in the world right now, the market will be very volatile moving forward.

In Short

With all the calculation done above, I will deem each CH share to be 35.8 cents (after a 20% discount – which is the least we should do for a satisfactory margin of safety). This will be about 19% of gain based on a share price of 30 cents.

Nevertheless, it is important to note that CH is a counter that will do well in bull run and WILL FALL significantly in a bear market. Over the last 3 years, I recalled the lowest share price seem to be 23.5 cents in 2016. That will be 16.7% of loss based on a share price of 30 cents.

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Do note that the author is vested in Chuan Hup Holdings Ltd.

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  1. Listed associates PCI, Finbar & PSD superior or inferior to non listed subsidiaries?

    Before discount, 100% ownership is being valued at book. While listed associates are being valued by market value which are premium/ discount to their books.

    1. Hi Donmihaihai,

      Thanks for commenting and reading.

      To question 1, I believe what I have taken out are more superior than their non-listed subsidiaries. What is remaining is the Keyland Ayala Properties Inc, 2 or 3 levels of GB building (investment properties), investment in australia residential properties along with finbar, and some smaller listed equities.

      Do note that these subsidiaries and associates are listed at cost as per annual report 2017.

      Hope this answer your question!


    2. Nevermind, made a mistake without realizing.

      The numbers you put out for PCI, Finbar and PAD are above book not below.

      Anyway, while it is possible that some company annual reports do reflect the investments in subsidiaries and assoicates in details in the notes, what reflected in B/S under group is never in cost.

    3. Hi Donmihaihai,

      Yup, the numbers are above book value. Thus, the amount of discount is required.

      As per the notes, the Balance sheet reflect these associates at cost and including dividend received and exchange differences.



    4. Associates - almost but also include earnings recognized by Chuan Hup.

      Subsidiary - consolidated under group.

  2. subsi and associates rather than associates.

  3. PCI is certainly riding on electronics boom currently and it is the most valuable listed company among the 3. PCI had also been paying decent dividend up to Chuan Hup due to their cash generative high mix, low volume manufacturing business model. Finbar had some tough years in Perth but outlook seems to be a bit better going forward. PSD is still quite small currently and can certainly grow further. Have to see the margin of their recent sales.

    1. Hi ghchua,

      Thank you for commenting on this post.

      I agree on your comments. PCI is CH cash cow. While Finbar is improving as compared to 2 years ago.

      PSD should continue to do well as per their recent outlook.



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