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Hong Leong Finance Investment Thesis

Prepared by Jun Hao Tay Tay Funds Director

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Disclaimer
This presentation should not be taken as a recommendation to anyone to buy, hold or sell Hong Leong Finance securities.
Our opinion of the prospects of Hong Leong Finance should not be considered a guarantee of future events.

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Introduction
• Largest Finance Company in Singapore • 28 Branches • Recipient of "Singapore Finance Company of the Year“ • Recently celebrated 50th Anniversary this year

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Financial Data Summary

Leverage Ratio

5.75

6.08

7.1

7.43

5.39

Hong Leong Finance is conservatively financed. Lowest leverage ratio in 5 years.

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Financial Data Summary

Latest Figures from 3rd Quarter 2011, Net Loans - $7,086 million Deposits - $7,322 million Business trends are improving, deposit base and loan volumes at trending upwards.
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Financial Data Summary

Relatively stable earnings even in 2008. Earning in excess of what it’s paying out in dividends. Book value showing upward trend.
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Why Invest in HLF?
• • • • • Low debt levels Sticking to core competence Long term track record Strong management Trading at a large discount to book value

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Price vs Book Value over past 10 Yrs
Optimism Pessimism

Pendulum has swung from extreme optimism to extreme pessimism with prices approaching their 2008 low.
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Historical P/B Ratio
1.6
1.4

1.2

1

0.8

P/B Ratio Historical P/B Ratio

0.6

0.4

0.2

0

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Huge Discount to Book Value
20/12/2011 Closing Price: $2.10 Book Value Per Share (Sep 2011): $3.57 Selling @ 58% Discount to Intrinsic Value Large margin of safety for business with long term track record
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For the Long Term Investor…
• Wonderful business selling at a large discount to intrinsic value • Not unreasonable to expect HLF to trade at book value of at least $3.50 • Current price provides hefty dividend yield ~ 5% • If the economy turns downwards, HLF will still be able to provide a dividend in the region of ~3% (based on past figures)
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Contact me at jht310@imperial.ac.uk for any questions.

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