DKSH Holdings vs. Harrisons Holdings

The author published the analysis report here is for his own reference only. It is not an indication of the author's business interests for companies being analyzed. It is definitely not an investment advice, please see the full disclaimer located at the bottom of the blog post.

DKSH Holdings (Malaysia) Berhad's (hereafter called "DKSH") principal activities including general trading, warehousing, and distribution of consumer, pharmaceutical, bio-medical, chemical, and industrial products, and also sale of the Famous Amos chocolate chip cookies. Harrisons Holdings (Malaysia) Berhad's (hereafter called "HARISON") principal activities including marketing, sales and distribution of consumer, engineering, building materials, wines and chemical products and the operation of shipping, insurance and travel agencies.

Side-by-side Comparison

Capitalization
Measure by size, HARISON is slightly bigger than DKSH, 17 millions.

Income Items
Important items under this section is per share earnings and dividend, HARISON is the all-time winner for both per share earning and dividend.

Balance Sheet Items
HARISON have more solid balance sheet compared to DKSH, Liquidity per share is 1.67 and 0.84, where Book value per share is 3.97 and 1.11.

Ratios
By look at Price ratios, HARISON is much more attractive at the moment given it sell at lower multiple of earnings currently and historically and much higher current dividend yield.

HARISON advantages are higher profit margin and appropriate return on book value with adequate gearing as shown by Net income/sales and Total Liabilities/book value. DKSH's level of gearing might be a concern as it is recorded 5.18 times. 

HARISON has better historical earning growth rate compared to DKSH in both near-term and long-term.
 
Price Record
DKSH has much better historical price growth rate in near-term and slightly better in long-term compared to HARISON.

Financial Summary

DKSH's Financial Summary

By looking into detail of the financial summary of DKSH, it show better records in 2010 and 2009 except increase of total liabilities 115 millions, 14.57% in 2010. Record of past two years make the growth numbers look great compare to records of 2006 to 2008. The new management deserved a great applause by achieved a decent operating result (improve return of shareholding equity and profit margin significantly, at the same time reduce the gearing of the company).

HARISON's Financial Summary

HARISON has great historical growth record, recorded CAGR for 8.1% in sales and 21.58% operating income, 29.53% in net income and earning per share and 29.17% in dividend per share. The company CAGR on the previous mentioned items better than DKSH, except net income and earning per share which may due to DKSH start from a low base. Historically, HARISON is more conservative financially compare to DKSH, as it utilized more appropriate level of financial leverages (D/E ratio 76%) compared to DKSH (D/E ratio 517.53%). Even HARISON has much better return on average equity, 5 years averaging 11.4%, compared to DKSH 8%, but DKSH has slightly better return on average equity in 2010 and 2009. However, HARISON has much better return on average assets, 5 years averaging 6.23%, compared to DKSH 1.15%, which may due to it has smaller asset base. Even DKSH has lower operating overhead than HARISON, 5 years averaging 0.78%, HARISON still in the winning side as it 5 years average profit margin is much higher, 2.33% compared to 0.34% of DKSH.

As conclusion, HARISON is the ultimate winner in this comparison.

How Much HARISON Worth?
Given the company CAGR of EPS is 15% (approximately 29.5% in the past 5 years) and Dividend Per Share is 12% in the next 10 years, the EPS of the company will be RM$1.074 in 2021 (included adjustment of 2 bad years in 10 which reduce 30% of group's net profit) and the forecast dividends received over the 10 years period totaling RM$1.85 (included adjustment of 2 bad years).

If the stock price of HARISON sell at 5 times earning in 2021, it is RM$5.37 and included total dividends received, it is RM$7.22 per share. Given annual 6% inflation rate in next 10 years, the discounted rate is 0.591898. So, RM$7.22 discounted to today price, it is RM$4.27 per share.

The discounted price is 19% higher comparing to yesterday (21 December 2011) closing price RM$3.46. The stock is in bargain! What do you think?

I'd love to hear comments from you!