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Hong Chew Eu
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Retired Group CEO of i-Bhd. Now a full time blogger
From Crumbs to Cash: How Hup Seng Is Quietly Winning the Game!
Hup Seng Industries Berhad is a well-established player in the biscuits, crackers, and coffee mixes market, with its products marketed under several brand names. Over the past six years, the company has undergone significant leadership transitions and operational modernization.
Between 2019 and 2024, revenue grew at a 5% CAGR, while PAT expanded at an 8.2% CAGR. This higher profit growth was not driven by margin expansion but rather better control over fixed costs - including Selling, General & Administrative (SG&A) expenses and Depreciation & Amortization. Over this period, fixed cost margins declined from 18% in 2019 to 15% in 2024, contributing to improved profitability.
As such ROE went from 26% in 2019 to 35 % in 2024. The impact of these improvements is evident in the Fundamental Mapper, where Hup Seng ranks as one of the better-performing businesses. However, its stock price has risen over the past year, and while it is currently below its past-year high, it still carries some investment risk.
The key question is whether the company can sustain its business improvements to justify a move into the Goldmine quadrant at its current valuation. Addressing variable costs and expanding margins could significantly enhance its positioning, making this a potential opportunity if executed effectively.
Hwa Tai’s business overhaul: Will it finally be profitable?
Between 2019 and 2024, Hwa Tai revenue grew at 8% CAGR. This increase can largely be attributed to strategic market expansion, digital transformation, new product innovation, and sustainability initiatives.
While Hwa Tai has seen steady revenue growth, its high operating costs, competitive pressures, financial obligations, and supply chain challenges have led to continued net losses. As such you should not be surprised to see that it is classified as a high-risk, low business performance company in the Fundamental Mapper.
For most of the time, it has been operating below its breakeven levels resulting in operating losses. To go beyond its breakeven levels, it can either grow revenue, improve its margins, reduce fixed costs or have a combination of them.
The revenue growth is a positive sign that resulted in positive operating profits in 2024. The company is working on cost optimization and operational efficiencies, and we can see some improving gross profit margins since 2022. Fixed cost margin has also been steady.
Its broadened market reach, improved sustainability efforts, upgraded operational efficiency, and adaptation to digital transformation trends provide hope that these improvements can be sustained. If so, then there is an opportunity for the company to improve its business performance.
When you look at the stock price trends, you can see that the market has yet to take these into account.
The key takeaway: While Hwa Tai has struggled with profitability, recent improvements suggest a potential turnaround. However, the market has yet to reflect this in its share price.
OCB’s Big Business Shift: Could This Be the Next Breakout Stock?
While OCB reports its performance under four business segments—Consumer Foods, Bedding Products, Building Materials, and Property Development—the majority of its revenue and profits come from the Consumer Foods segment.
Over the past five years, the company has undergone significant business restructuring. In 2022, OCB introduced Property Development as a new segment, while in 2024, it discontinued its Building Materials business. This strategic shift has allowed the company to focus on higher-margin businesses, positioning it for long-term growth. However, the transition has also presented short-term financial challenges.
• Revenue has rebounded strongly after a dip in 2021, largely driven by the strong performance of the Consumer Foods segment (refer to the leftmost chart).
• The Property Development segment is still in its early stages, but it has started contributing revenue and represents a potential long-term growth driver.
• The discontinuation of the Building Materials segment removed a lower-margin business and is expected to improve operational efficiency. In the short term, however, this exit resulted in a financial loss in 2024 due to restructuring costs.
After experiencing significant losses in 2019 and 2021, OCB returned to profitability in 2023. However, in 2024, net profit declined, primarily due to the disposal of a subsidiary and higher tax expenses. Despite this, the company remains in a much stronger financial position than in previous years, with improved cash reserves and profitability trends.
Currently, OCB is classified in the Turnaround quadrant on the Fundamental Mapper (refer to the rightmost chart), indicating that its business fundamentals have improved but are not yet fully recognized by the market.
Despite its financial recovery, OCB’s stock price has remained relatively stagnant over the past three years, suggesting that the market has yet to reflect the company’s better prospects.
If the stock price remains unchanged while financial performance continues to improve, OCB will eventually move into the Goldmine quadrant, where both fundamentals and valuation will align favourably for investors.
CCK’s profits are falling, but the growth story is not over yet
Bursa Malaysia CCK operates four key segments - retail, poultry, prawn, and food services. Retail is the dominant revenue driver, contributing nearly twice that of poultry. Vertical integration supports cost efficiency, but raw material price fluctuations remain a risk.
While revenue has grown, profitability declined due to higher costs and the end of government subsidies for poultry. The stock price saw strong gains but has since pulled back, reflecting investor caution on margin pressures. Despite this, CCK remains in the Goldmine quadrant in the Fundamental Mapper, signaling strong fundamentals and low investment risk.
Despite near-term cost pressures, CCK has several strategic initiatives that could drive future growth:
• Retail & Indonesian Growth – Store expansions and rising demand for in-house processed products.
• Strategic Partnership of its Indonesia outfit to boost manufacturing and exports.
• Cost Management – Vertical integration helps, but feed price volatility remains a challenge.
While CCK is fundamentally strong, it must navigate cost pressures to sustain its Goldmine positioning. Retail and Indonesian expansion are key to long-term growth.
Since the pandemic, Heineken Malaysia has improved its performance, with ROA rising to 27% (2023/24) from 16% (2020/21). However, this growth has been driven by topline expansion rather than margin improvements. Revenue is 45% higher, but gross profit margins declined from 29% to 27% comparing the 2 periods.
With a 3.8% CAGR from 2019 to 2024, Heineken’s growth mirrors Malaysia’s long-term GDP rate. If this continues while maintaining current margins and costs, profits should grow steadily. However, there are signs of improving efficiency, as operating profits and ROA have increased, indicating better cost management and asset utilization.
From a fundamental perspective, Heineken remains a strong performer, reflected in its position on the Fundamental Mapper. However, from a value investing standpoint, the stock is trading at 17x PE and only 8% below its five-year high, suggesting limited margin of safety.
MyEG’s Silent Revolution: A Hidden Goldmine or a Missed Opportunity?
Over the past five years, MyEG has evolved from a government service provider into a regional tech-driven digital solutions company, diversifying revenue beyond government contracts.
Year 2019 to 2021: Foundation & Pandemic Boost
MyEG built its business around e-Government services like road tax renewals and summons payments. The COVID-19 pandemic accelerated growth, as MyEG adapted by offering health screening and quarantine solutions.
Year 2022: A Strategic Shift
To reduce reliance on government contracts, MyEG expanded into commercial services like car insurance, financing, and online marketplaces. These higher-margin businesses helped sustain profits despite the decline in pandemic-related revenue.
Year 2023 to 2024: The Game Changer
MyEG entered the blockchain and Web3 space, launching Zetrix, a blockchain platform enabling cross-border trade and digital identity verification. This unlocked new revenue streams and expanded MyEG’s footprint into China and Southeast Asia.
Stock Price vs. Business Growth: A Gap?
The company’s revenue and earnings have grown steadily, but stock price volatility over the past three years raises questions.
As seen in the Fundamental Mapper, MyEG is borderline between the Gem and Goldmine quadrants. If business performance continues to improve while the stock price remains unchanged, it could shift into the Goldmine quadrant, signaling better investment potential.
Will the market eventually catch up with MyEG’s transformation?
Mega First’s Renewable Energy Empire: Sustainable or Just a Lucky Streak?
Over the past decade Mega First has grown its renewal energy segment so that today its is the main earnings contributor. As can be seen from the left part of the chart, the contribution for the other segments are not very significant.
When you look at the earnings trend for the Renewal Energy division, you have to remember that there have been changes in the source of revenue over the past 12 years. Refer to the right part of the chart.
Initially the revenue and earnings came mainly from the China and Tawau projects. When these ended in 2017, the revenue from the construction of the Loas hydro plant became a significant contributor.
In 2022, with the completion of the construction of the hydro project, power sales from the hydro project became the biggest revenue contributor.
Its main renewal energy business today comes from its hydro plant in Laos that has a long-term concession (until 2045) providing it with stable cash flows.
Over the past few year, the Group has delivered good returns and is financially sound. Part of this good performance was due to the tax incentives for the hydro plant. My valuation assuming that there is no longer any tax incentives showed that the market price reflects the business value.
Overall, while Mega First has built a strong renewable energy platform, its long-term attractiveness as an investment will depend on how well it navigates some the following challenges and opportunities.
• Will the Laos economy have a long growth runway?
• How will the company maintain its earnings momentum once the tax benefits taper off?
• Are there plans to acquire new projects or enter new markets to provide a growth path?
Press Metal Aluminium is the largest integrated aluminium producer in Southeast Asia. Over the past five years, the company has strengthened its market position by improving cost efficiencies, expanding into new high-growth markets, and enhancing its sustainability focus.
These strategic initiatives have contributed to its improving financial performance, as illustrated in the two middle charts. However, its performance trends also coincided with the uptrend in the aluminium price cycle.
As shown in the leftmost chart, Press Metal’s stock price is currently lower than its past three-year high. At the same time, it is positioned within the Gem quadrant, indicating strong business fundamentals.
This positioning suggests that the market may be anticipating a downtrend in aluminium prices, which could impact future earnings. Is the market wrong?
• If the market is right, the company's stock would be overvalued based on historical performance.
• If the market is wrong and aluminium prices remain strong and companies like Press Metal may continue to thrive.
This raises an important question: Is the company’s growth primarily driven by operational improvements, or is it largely influenced by rising aluminium prices?
