Brokers' take: KGI expects Hanwell to ride on logistics growth, initiates with 'neutral'

Vivienne Tay

Published Tue, Oct 5, 2021 · 03:59 PM

KGI Securities has initiated coverage on Hanwell Holdings, a group that manufactures, distributes and markets a range of food and consumer goods.

The research team has a "neutral" call on the mainboard-listed counter with a target price of 42 Singapore cents - 11 times its FY2022 earnings per share estimate of 3.8 cents.

KGI's target price represents an upside of 6.3 per cent from Hanwell's trading price of 39.5 cents as at 3.26pm on Tuesday. The counter was flat at the time.

The research team expects Hanwell's packaging business to be the main driver of growth for the group, amid robust global logistics demand. The group has a 64 per cent stake in mainboard-listed Tat Seng Packaging, a paper packaging business that caters to Singapore and China.

Tat Seng had contributed about 62-66 per cent to Hanwell's total top line over the last four years, KGI noted. Amid the backdrop of accelerating e-commerce sales and increased demand for storage materials due to logistics bottlenecks, KGI estimates demand for corrugated cardboard boxes to rise.

Moreover, KGI projects stable contributions from Hanwell's consumer goods segment, which has been generating a consistent revenue stream over the last four years. It expects further growth in this area as the group looks to expand its offerings by 30 per cent in the next three to five years.

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Hanwell has a total of four subsidiaries involved in the fast-moving consumer goods business - rice and oil distributor Topseller, paper goods and diapers distributor Tipex, as well as Fortune Food Manufacturing, which manufactures noodles, desserts and soybean-based products.

Hanwell also has SOCMA Trading Sdn Bhd, one of its marketing and distribution arms in Malaysia.

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