We have come to the tail end of the earnings season, where most companies with their quarter ended 31 December 2020 would have already posted updates about their latest quarter’s financial performance. As a long-term investor, one of the things I do to keep abreast of the latest developments of companies I’ve invested in is in their quarterly results update.
Speaking of which, Hong Long Finance Limited (SGX:S41) is the last company in my long-term investment portfolio (you can check out a list of all the companies I have invested in here) to report its financial results for the fourth quarter, as well as for the full-year 2020 ended 31 December 2020 after market hours yesterday (25 February 2021.)
As usual, I have studied the financial institution’s latest results update and in this post, you will find a summary of the most important statistics to take note of, details about its upcoming dividend payout, along with my personal thoughts as a shareholder about the company.
Let’s begin…
Financial Performance (2H FY2019 vs. 2H FY2020, and FY2019 vs. FY2020)
In this section, I will first take a look at the financial institution’s results on a year-on-year (y-o-y) basis (i.e. FY2019 vs. FY2020), followed by its results for the second half of FY2020 against that posted for the same time period last year (i.e. 2H FY2019) which I have manually computed based on its results reported in the first-half of the respective financial years:
FY2019 vs. FY2020:
| FY2019 | FY2020 | % Variance | |
| Total Income (S$’mil) | $215.7m | $158.8m | -26.4% |
| – Net Interest Income/ Hiring Charges (S$’mil) | $201.7m | $146.8m | -27.2% |
| – Fee & Commission Income (S$’mil) | $13.7m | $10.2m | -25.4% |
| – Other Operating Income (S$’mil) | $0.3m | $1.7m | > 100.0% |
| Net Profit Attributable to Shareholders (S$’mil) | $103.1m | $63.9m | -38.0% |
It did not come as a surprise to me to find the financial institution’s results being a weaker one compared to the previous financial year, in view of the headwinds posed by the ongoing Covid-19 pandemic.
The company’s total income, comprising of net interest income/hiring charges, fee and commission income, as well as other operating income, fell 26.4% due to declines in its net interest income/hiring charges (due to a compressed net interest margin), as well as in its fee and commission income (as a result of lower fee income earned from both lending and non-lending activities in 2020), offset by an increase in its other operating income.
Finally, its net profit attributable to shareholders fell by 38.0% due to a huge increase in allowances set aside for doubtful debts and other financial assets (from S$1,578m in FY2019 to S$7,733m in FY2020.)
2H FY2019 vs. 2H FY2020:
The following table is the financial institutions results recorded in the second half of the financial year 2019 (i.e. 2H FY2019 between 01 July 2019 and 31 December 2019), as well as in the second half of the financial year 2020 (i.e. 2H FY2020 between 01 July 2020 and 31 December 2020) which I have computed based on its results recorded in the first half of the respective financial years:
| 2H FY2019 | 2H FY2020 | % Variance | |
| Total Income (S$’mil) | $106.7m | $71.7m | -32.8% |
| – Net Interest Income/ Hiring Charges (S$’mil) | $92.6m | $59.7m | -35.5% |
| – Fee & Commission Income (S$’mil) | $7.1m | $5.4m | -23.9% |
| – Other Operating Income (S$’mil) | $0.22m | $1.62m | > 100.0% |
| Net Profit Attributable to Shareholders (S$’mil) | $50.6m | $27.4m | -45.8% |
Similar to its full-year results, the financial institution’s results for the second half of the year were similar – its total income fell due to declines in its net interest income/hiring charges, and in its fee and commission income, with the drop offset by growth in its other operating income in the same time period.
My Thoughts: As I have mentioned when I reviewed the company’s financial results for the first half of the year (you can read the post in full here), the decline was within my expectation due to headwinds the financial institution had to navigate through as a result of the ongoing Covid-19 pandemic, which hit many individuals and businesses hard.
Dividends Declared
For the period under review, a dividend payout of 5.5 cents/share was declared. Together with a dividend payout of 3.5 cents/share declared when the company released its results for the first half of the year, its total dividend payout for FY2020 amounted to 9.0 cents/share (which is 60.0% of the 15.0 cents/share of dividends paid out in FY2019, as advised by the Monetary Authority of Singapore.) Shareholders will receive the 5.5 cents/share of dividend payout on 25 May 2021.
In Conclusion
Similar to my outlook for the 3 Singapore banks in the year 2021 ahead, I am of the opinion that businesses should slowly recover now that the pandemic has been brought under control in Singapore, coupled with the population in the process of being vaccinated.
Should there be no resurgence in the number of community cases, and normalcy gradually resume, the financial institution’s results in the year ahead (i.e. FY2021) should be an improved one compared to the previous year (i.e. FY2020.)
The company will be holding its annual general meeting on 29 April 2021, which I will be attending and provide updates in due course.
Finally, as far as its dividend payouts in the financial year ahead is concerned, we await for announcements from the Monetary Authority of Singapore.
With that, I have come to the end of my review of Hong Leong Finance’s latest financial results. As always, I hope you have found the information presented useful and do take note that they are meant for educational purposes only. Please do your own due diligence before you make any investment decisions.
Related Documents
Disclaimer: At the time of writing, I am a shareholder of Hong Leong Finance Limited.
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