Inside The Bedokian’s Portfolio is an intermittent series where I will reveal what we have in our investment portfolio, one company/bond/REIT/ETF at a time. In each post I will briefly give an overview of the counter, why I had selected it and what possibly lies ahead in its future.
For this issue, I will discuss about the locally listed company YHI International Limited (YHI) (ticker: BPF).
Listed on the SGX since 2003, YHI is in the business of distributing automotive products such as tyres, alloy wheels, buggy and utility vehicles, energy solutions, etc. It is also an original design manufacturer of alloy wheels, with factories located in China, Taiwan and Malaysia.
Some of the known brands and products distributed include Pirelli and Yokohama tyres, and Enkei and Sparco alloy wheels, names which are familiar to car drivers and enthusiasts.
I had “discovered” YHI back in 2018 during one of my counter prospecting exercises using online screeners, and I took a look at its ratios using Yahoo Finance. As I did not record my then findings on paper, I would use figures from the 2017 annual report instead1 (using my entry share price of SGD 0.38 as basis):
- P/E Ratio: 0.38 / 0.0299 = 12.7
- P/B Ratio: 0.38 / 0.8488 = 0.45
- D/E Ratio: 126,667 / 260,807 = 0.49
- Current Ratio: 267,057 / 109,046 = 2.45
- Dividend Payout Ratio: 50%
- Dividend Yield: 0.015 / 0.38 = 3.95%
Using the selection guidelines listed in my eBook2, the P/E ratio was lower than that of the other listed company in a similar business, while the P/B, D/E, Current and Dividend Payout ratios checked out. The past three years’ dividend yields (using SGD 0.38 as base) were 1.68%, 3.74% and 3.16% for the years 2016, 2015 and 2014 respectively, which I find it acceptable given that the then 10-year average inflation rate (2008 – 2017) was about 1.84%3.
YHI’s business can be seen in two major parts: distribution and manufacturing. For distribution, their key markets were at ASEAN, northeast Asia and Oceania, whereas the customers for their manufacturing business were mainly from Europe and North America. Thus, YHI’s target markets can be considered global.
Despite falling revenues over the years leading to 2017, the net profit attributable to equity holders remained fairly constant (save for 2016) and their liabilities were reducing. Moving forward along 2018 to 2021, net profit attributable to equity holders soared, culminating at a high at 2021, and with a slight rise in its liabilities4.
The main gist of selecting YHI, besides its better ratios and numbers, is this: Using associative investing methodology5, the conclusion I inferred was that regardless of what the vehicle runs on, whether on petrol, batteries, hydrogen or hybrid, tyres and alloy wheels are must-haves on all, if not, most of them. In other words, YHI’s business is there and ready to take advantage of the rise of popularity in green vehicles.
Going forward, I see further potential in YHI. They are ramping up their production capacity and further develop their product innovation. Their established foothold in the ASEAN region would enjoy the positive spillover effects from the growth of India and the re-awakening of the China economy with the loosening of COVID-19 curbs.
Bought YHI at:
SGD 0.38 at Oct 2018
SGD 0.385 at Oct 2018
SGD 0.335 at Aug 2019
1 – YHI International Limited Annual Report 2017, p8-9
2 – The Bedokian Portfolio (2nd Ed), p103-105
3 – MAS Core Inflation (Yearly). MAS Core Inflation and Notes to Selected CPI Categories. Monetary Authority of Singapore. https://www.mas.gov.sg/-/media/MAS/EPG/Statistics/03_Core_Inflation/2021/MAS-Core-Inflation-and-Notes-to-Selected-CPI-Categories_202107.xlsx?la=en&hash=04E32F9956BEB6729FF1C520219CA8FAA2B992B8 (accessed 8 Dec 2022)
4 – YHI International Limited Annual Report 2021, p8-9
5 – The Bedokian Portfolio (2nd Ed), p137-138