Hong Leong Asia (HLA SP) delivered robust financial performance for 2024, reporting a 35.3% year-on-year increase in Profit After Tax and Minority Interests (PATMI), driven by strong results from its two primary business segments: China Yuchai and Building Materials Unit (BMU). The company maintained its BUY rating with a SOTP-based target price of S$1.11, reflecting a 20% upside potential.
Financial Highlights:
- Revenue rose by 4.1% year-on-year to S$4.25 billion.
- Gross Profit increased 6.8% to S$730.8 million, with a slight improvement in Gross Margin from 17.1% to 17.2%.
- PATMI surged 35.3% to S$87.8 million, supported by higher unit sales from China Yuchai and strong order books for BMU.
- Despite a 1.3% dip in revenue for China Yuchai due to currency headwinds, the segment saw a 10.9% increase in units sold.
- BMU experienced a 4.9% rise in revenue to S$682.3 million, benefiting from the ongoing construction industry upcycle.
Dividend Boost:
- Hong Leong Asia declared a final dividend of 3 Singapore cents per share, doubling the total dividend for 2024 to 4 Singapore cents per share, compared to 2 Singapore cents in 2023. This represents a 35% payout ratio and a 4.3% yield, exceeding market expectations.
Market Outlook:
The company remains undervalued despite a positive outlook for its core businesses. With a solid order book for BMU and steady demand for China Yuchai products, Hong Leong Asia is well-positioned to capitalize on growth opportunities in 2025.
Analysts from UOB Kay Hian recommend maintaining a BUY rating for Hong Leong Asia, citing its attractive valuation and strong business fundamentals.
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