Good News: Underwater World is Closing!

If you were born in the 80s in Singapore, you would be familiar with Underwater World Singapore (UWS). I had many wonderful memories at UWS as a child. Therefore, it was with a tinge of sadness when I heard that UWS was about to shut down.

However, I noticed something new about the UWS logo. Under its logo, there was a sentence: “A member of the Haw Par Group”. Hey, that pique my interest! That’s because I know Haw Par Group.

Haw Par Group is the parent company of the world most famous medicated ointment.

Yes, it is Tiger Balm. So with a bit of time in my hand, I decided to pay homage to UWS and research into the parent company of Tiger Balm – Haw Par Group.

Haw Par Group is headed by Wee Cho Yaw, who is also the Chairman of United Overseas Bank (UOB), while the CEO of Haw Par Group is Wee Ee Lim, son of Wee Cho Yaw.

A quick look into Haw Par Group.

Business Overview:

Three core businesses, Healthcare, Leisure and Investment. Haw Par’s main Healthcare business is Tiger Balm, while its Leisure business is Oceanarium which includes Underwater World Singapore at Sentosa and Underwater World Pattaya in Thailand. Under its Investment business, Haw Par also owns investment properties and securities.

Financial Overview:

Based on its turnover, also known as overall sales figure, it is obvious that Tiger Balm provided most of sales and had increased between 2014 and 2015. While the Leisure and Property business have been contracting. (Maybe that’s why they are shutting down UWS)

However, when we take a look at the profits, it presented a very different picture! The majority of the profit is from its Investment. In fact, the profit from investment doubled between 2014 and 2015.

So I took a closer look at the Investment business and I realised, to no surprise, its key investments consist of shares of the companies under Wee Cho Yaw, especially United Overseas Bank.

Investment Thesis:

Based on the companies earnings per share in the past, the business seems to be growing well. However, it is important to note that there was a one-0ff gain in 2015 due to their sale of shares in a subsidiary. Therefore, taking that into account, I would not consider this as a growing business.

So I look into two other things, Dividend and Net Asset.

In terms of dividend, it is not very attractive. It distributes about $0.20 per share which translate to about 2.27% dividend yield. I would rather buy UOB shares directly as it gives out about 3.7% dividend yield.

However, the interesting part is in Net Asset. Take a look at the assets and you will realise that most of its assets are either cash or financial assets or investment properties. Not any of those fluffy things such as goodwill or intangible assets.

In the latest statement, if we add up all of the cash, financial assets and investment properties, its total asset will be $2,515 million. And when you deduct all its liabilities, you will arrive at a net asset value of $2,363 million. Dividing that by the number of issued shares, you will arrive at $10.78. This means the company is currently worth $10.78 per share after paying of all its debt.

The current share price of Haw Par Group is $8.82. This means you can buy Haw Par Group shares at ~20% discount!

Given, that most of Haw Par Group asset are tangible assets such as UOB shares, this means you are literally buying UOB shares at a discount! That’s way better than the dividend yield.

Now while I’m feeling sentimental about the closure of UWS, a deeper look into the books of Haw Par Group shows that it is the least profitable business of all. In fact, it has been losing money for the last couple years. Therefore, shutting down UWS would be better for Haw Par Group as a business, and beneficial for the shareholders should Haw Par Group redeploy the cash into other businesses or distribute it as dividend.

Many people always lament that investing is tough and mysterious, but actually it is everywhere in our daily lives. Investment opportunities surround us all the time, even when we were kids! Just need to keep our eyes open and look a little deeper. Let me know about your thought of Haw Par Group too!

See you soon!

Investing Always,

Pete

Please refer to the disclaimer here