HTL International:Is it a value trap?
Disclaimer:I am vested in this stock, so opinion will be biased
HTL International was featured in today’s newspaper on Singapore companies spreading wings abroad, i guess that’s why its volume has shot up. Anyway,the problems at HTL International remains as for now, high leather hide prices which caused their short term debts which are subjected to rising interest rates to balloon.
Although HTL’s CEO said that they are expanding their retail franchise business of Domicil for more affluent customers and another brand “Gallery” for less affluent customers in China which sounds attractive considering that their competitor, Man Wah has achieved great success in China, but it all boils down to execution and china sales have been falling, so it won’t move the needle even if it climbs.
HTL is quoting at net-net price, which is considered a bargain if you believe that leather hide prices will fall (thus their debt will be reduced) and sales will pick up. However, if leather hide prices go higher, all bets are off, i will be prepared to sell as bankruptcy may become a possibility with cash dwindling.
They lost several key management in recent years, the chairman has been recently changed to an independent director instead of the eldest Phua brother.A director skilled in retail management was brought in. The share option scheme for associates of controlling shareholder was shot down at AGM.
HTL International has gone through bad times before,but this may be the greatest test for Phua’s brothers. They need to kick out dead wood (including themselves,if they are) and rejuvenate the company and pray for leather hide prices to fall. Time is not on thier side (they are above 60 years old), it’s now or never.
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