Hock Lian Seng: Testing 39.5c resistance.

The last time I blogged about Hock Lian Seng was in December last year. Since then, the stock has seen its price rising almost relentlessly. Drawing some Fibo lines shows that share price is now probably testing the resistance at 39.5c. It is a golden ratio and probably quite a strong resistance.

I have readers asking me if they should sell their investment in Hock Lian Seng in the last month or so. I said it is really up to them.

I am not ready to sell because I invested in Hock Lian Seng for income and even at 36c a share, a 1.8c dividend per share (DPS) would still mean a 5% dividend yield and that is based on a 40% pay out ratio. Still a pretty good income generator. So, even at 36c, it wasn't a price I would sell at.

Just now, I was alerted by a reader that Hock Lian Seng is declaring a 4c DPS and although I thought a bumper dividend possible before, it is still a pleasant surprise. This means a dividend yield of as much as 16.67% based on my lowest entry price in October 2011.

Over the years, Hock Lian Seng has been a very rewarding income investment for me and the higher DPS declared today is the icing on the cake.

What about the future?

Hock Lian Seng has been winning projects and their order book is now worth about $457 million. Even without new order wins which I think is unlikely, they will be kept busy for many years. This is in line with my initial investment thesis that Hock Lian Seng is a natural beneficiary of our country's escalating investment in infrastructure projects till the year 2030.

Hock Lian Seng has another industrial development property project which will obtain TOP probably in the next month or so. This will mean recognising more net proceeds as the project is almost 90% sold. An interim dividend, perhaps? Well, we can always hope although given the conservative nature of Hock Lian Seng's management, I doubt that it would happen.

Now, let us look at the burr in Hock Lian Seng's side, the Skywoods. Although the Skywoods condominium is less than half sold, I have written a pretty detailed piece before on how Hock Lian Seng's business is much more than just Skywoods. This residential development project, a joint venture, is expected to obtain its TOP sometime in 2016.

Recent transactions for Skywoods.

I would have been quite contented to stay invested in an income generating business that Mr. Market wasn't paying much attention to as I would have liked to build a bigger long position at lower prices. With the attention that Hock Lian Seng is now getting, I feel that its stock is no longer undervalued but, taking everything into consideration, it isn't expensive either.

See financial statement: here.

Related post:
Hock Lian Seng: Robust order book.