Ming Fai International Holdings Ltd (3828.HK) is one of the world’s leading suppliers of amenity products and accessories for the hospitality and airlines industry. The company is furthermore distributing cosmetics products and fashion accessories through an own retail chain in China.[mepr-active membership=”1734″ ifallowed=”show” unauth=”message” unauth_message=”Please login or purchase a membership to view full text.”]
Ming Fai International was founded in 1980 and is headquartered in Hong Kong. The company is listed on Hong Kong’s Stock Exchange since 2007. Its shares can also be traded in Germany and the US. Around 56% of the shares are in public hand, 48% are held directly or indirectly by the chairman and his wife.
With two production facilities located in Shenzhen and Guangdong province, the company sells its products mainly to China and Hong Kong (48% of total sales) and North America (24%) followed by Europe (10%) and other Asia-Pacific countries. The five largest customers account for around 22% of the company’s sales.
While 98% of the sales are generated from amenity products, the company struggles with its loss-making retail business. The company had to reduce the number of outlets significantly from 805 in 2014 to 387 in 2016 and is discontinuing investment in this segment. Promising, on the other hand, is the expansion into the OS&E (Operating Supplies and Equipment) business that will develop a more extensive customer base in the hospitality industry.
With a workforce of about 3,800 employees, Ming Fai International reported revenues of 1.7bn HKD (218m USD) and profit before tax of 191m HKD (25m USD) for 2016, a decrease of 1% and an increase of 196% respectively on a year-on-year basis and including several significant non-recurring items. In 2015 revenues were up 5% while profits were down 355% compared to the year before due to impairment of goodwill and assets in its retail segment. With operating margins of more than 7%, the company is well ahead of its competitors. Ming Fai International’s cash reserves at the end of 2016 have been 509m HKD (65m USD). The company shows a strong balance sheet with an equity ratio of 61% and a gearing, defined here as total liabilities to total equity, of 65%.
Ming Fai International’s shares are in an uptrend since January 2016 and more than doubled in value since, 17% alone this year. The company is still reasonably priced at only five times earnings, compared to 40 times among its sector peers. Ming Fai International trades currently slightly below book value and at five times cash flow. The last dividend payments yielded more than 5%. The share trades above its rising 200 moving average line.
Scaling down the loss-making retail business and focusing on the hospitality industry might further improve the profitability of the company. But revenues will highly depend on the development of the international tourism industry which is expected to grow by 4% in 2017.
AIS Rating: ★★★☆☆
| 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | |
|---|---|---|---|---|---|---|
| EPS (HKD) | 0.11 | 0.11 | 0.06 | 0.09 | -0.32 | 0.22 |
| Change | -39% | 0% | -45% | 50% | -456% | 169% |
| P/E | P/E SECTOR |
P/B | P/CF | Equity Ratio* |
ROE | Debt/ Equity** |
Div YLD |
|---|---|---|---|---|---|---|---|
| 5 | 39 | 0.9 | 5 | 61% | 16% | 65% | 5% |
* Equity / Total Assets, ** Total Liabilities / Equity
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