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Hock Lian Seng returns 100% and more!

Wednesday, February 15, 2017

One of the things that I like to do is to buy into what looks like a fundamentally sound business when insiders are accumulating. One such stock which has amply rewarded me over the years is Hock Lian Seng.

I already had a small position in Hock Lian Seng but decided to buy more in 2011 when I observed insiders buying. Back then, I paid 24c a share. 

Fully confident that the company would be able to continue with a dividend per share (DPS) of 1.5c, I was looking at a dividend yield of 6.25% back then. That was in October 2011. Read blog: here.

A few months later in February 2012, Hock Lian Seng declared a DPS of 2c which translated to a dividend yield of 8.33%! That it represented only 32.8% of earnings was pleasing. 

They were retaining earnings which increased the value of the stock. Read blog: here.

In both 2013 and 2014, Hock Lian Seng declared a DPS of 1.8c. In between, I had an opportunity to add to my investment, paying 26c a share in May 2013, confident that a DPS of 1.5c remained undemanding. Anything more would have been a bonus. I was not disappointed. Read blog: here.

Almost a year later in February 2014, Mr. Market gave me a chance to buy again cheaply. That time, I paid 25.5c a share. I would have liked to accumulate more later on but Hock Lian Seng received positive media coverage by end of 2014 and its share price quickly rose. Read blog: here.

In 2015, Hock Lian Seng declared a DPS of 4c! Mr. Market's exuberance went through the roof!

I cautioned that the 4c DPS was a one off event and unlikely to be recurring as Hock Lian Seng saw its share price rocketing. 


Too many analysts and investors were waving the 4c DPS around as if it was a regular event. 

I won't be surprised if there were many newly minted Hock Lian Seng investors that year. 

I did not add to my investment but, throughout the buzz, I held on to my investment and enjoyed a dividend yield of 15.38% to 16.66% that year. Read blog: here.

In 2016, Hock Lian Seng declared a more normalised DPS of 2.5c. Mr. Market wasn't enthused and its share price reflected the mood. However, its share price did not go below 30c. If it did, I would have bought more. 

Of course, it stands to reason that Hock Lian Seng should not trade at below 30c a share. It is a more valuable company today than it was in 2011 from retaining earnings for so many years.

Yes, on top of the dividends I have received over the years from Hock Lian Seng, my stake in the business has also appreciated in value. The total return has been more than satisfactory.

Hock Lian Seng's sound fundamentals might have caught the attention of Mr. Market and its share price recently went ballistic. 


I don't pretend to understand everything but I understand that selling about half of my investment in Hock Lian Seng would make my remaining investment free of cost. This is without taking into account the dividends received over the years too. 

I talked to myself, I listened and I acted accordingly. Spooky!

Hock Lian Seng could possibly announce a DPS of 2.5c sometime in the near future. Based on 52.5c per share, that would give a dividend yield of 4.76%. 

Based on my cost, however, I would get dividend yields of 9.6% to 10.4%.

Wait a minute, since my remaining stake in Hock Lian Seng is free of cost, what should my dividend yield on cost be? Alamak. How to calculate like that?

I shared in a blog many years ago that my investment in First REIT was for keeps. To be fair, there are a few other investments in my portfolio which I feel the same way about.

My blog is not very cerebral in nature because I am not a very intelligent person. I am not being modest here. I am being honest.

Not being very intelligent, I hope to be rewarded by simply staying prudent, pragmatic and patient. 

I believe we don't have to be smart to be rich. If AK can do it, so can you.

Related posts:
1. First REIT: This one is for keeps.
(In five and a half years, I would have recovered my capital. )
The best investment we can make is not in First REIT or Hock Lian Seng. The best investment we can make is in our own education.
2. Don't have to be smart to be rich.
3. Robust order book at 3 year high.

6 comments:

redponza said...

Hi AK,
Have delved into these construction gems in 2015.
I checked the whole list and finally just bought Sim Lian :)

It is a shame that it is privatized at a lower price, otherwise I believe it will certainly be a more rewarding investment!

Also tried Low Heng Huat, but seeing that Singapore property market is beginning to fall, the construction sector may be weaker in the coming years, I exited finally...

Just A Singaporean Son said...

Hi AK,

Nice play there! I would sell half and let the remaining 'freehold' continue to generate income for me too.

Been reading your blog regularly and find your posts informative. Keep it up.

You are one of the blogs in my reading list.

Regards,
JASS
https://justasingaporeanson.blogspot.sg/

AK71 said...

Hi redponza,

I like to think that even during bad times, there are opportunities in construction.

In Singapore, those opportunities would take the form of MRT lines, airport expansion, roadworks etc. Public works.

Hock Lian Seng should continue to benefit.

AK71 said...

Hi JASS,

Welcome to my blog.

I am glad you like it. :)

AK71 said...

HLS declared 10c Special Dividend and 2.5c Final Dividend.

Total DPS: 12.5c.

http://hlsgroup.listedcompany.com/news.html/id/570181
http://hlsgroup.listedcompany.com/news.html/id/570179

AK71 said...

I said this on FB:

I sold half my investment at lower price earlier this month.
Those who are chasing HLS higher now might get burnt.
Ask how much is HLS worth after payout of bumper dividend?
Logically, NAV will decline 12.5c.
Something like this happened before a few years ago.
History could repeat itself. Deja vu.

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