Hap Seng: Diversified but Defensively Weak

Value Investing Case Study 74-2: An updated fundamental analysis of Hap Seng Consolidated Berhad to assess whether it is becoming a value trap.   

Back in 2024, I reviewed Hap Seng Consolidated and raised red flags about its reliance on land sales to boost property earnings and questioned whether its defensive qualities were overstated. One year on, the follow-up tells an even sharper story - and not in the way long-term investors would hope.

Over the past decade, Hap Seng’s revenue grew at a modest 2.8% annually, yet profits have trended downward, with 2024 profit 20% lower than in 2015. Even more concerning, EPS shrank, making it one of the weakest among its Bursa peers. ROE has fallen steadily, while cash flow conversion was so poor that dividends often depended on divestments or debt rather than real profits.

Yes, Hap Seng still boasts market-leading EBIT margins often double that of competitors - and it has built a sizeable liquidity buffer. But these strengths come with trade-offs - high leverage, weak moat businesses and mature markets.

When compared with peers, Hap Seng shines in profitability and cash flow margins, but lags badly in growth. While others expanded revenue post-pandemic, Hap Seng’s top line kept shrinking over the past 3 years

So, is Hap Seng a safe haven in turbulent times, or just a slow-burning value trap? The answer depends on whether management can defend margins, fix capital allocation, and build true moats in its core divisions. 

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PS: If you are in Malaysia or Singapore, the e-book can only be download from Kobo and Google Play. 

Disclaimer & Disclosure

I am not an investment adviser, security analyst, or stockbroker.  The contents are meant for educational purposes and should not be taken as any recommendation to purchase or dispose of shares in the featured companies.   Investments or strategies mentioned on this website may not be suitable for you and you should have your own independent decision regarding them. 

The opinions expressed here are based on information I consider reliable but I do not warrant its completeness or accuracy and should not be relied on as such. 

I may have equity interests in some of the companies featured.

This blog is reader-supported. When you buy through links in the post, the blog will earn a small commission. The payment comes from the retailer and not from you.

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