HUP Seng Industries Bhd, manufacturer of the renowned Ping Pong brand cream crackers, has reiterated that its crackers manufactured and marketed in Malaysia are fit for human consumption and would extend fullest cooperation to health authorities in their investigation.
This comes in the wake of a damning study by the Hong Kong Consumer Council (HKCC), an independent statutory authority, based on off-the-shelf pre-packaged biscuits available in the Hong Kong market.
HKCC reported the following findings:
- All 60 samples tested within its study contained strains of cancer-inducing contaminants i.e. glycidol and/or acrylamide;
- 85% of samples were high in fat, sugar or sodium; and
- 40% of samples were not compliance with the standard of nutritional labelling.
Apart from the Hup Seng Special Cream Cracker, other biscuits sampled which are available in Malaysia include the Oreo Mini, Ritz Cracker, Jacob’s Original Cream Cracker and Julie’s Lemon Puff Sandwich.
Following HKCC’s findings, the Malaysian Health Ministry is said to have initiated examination over biscuit makers in Malaysia, including Hup Seng, to verfiy the claims by HKCC.
Separately, it is worth noting that factory premises of Hup Seng hold the Hazard Analysis and Critical Control Points (HACCP) and Good Manufacturing Practice (GMP) certifications through the Health Ministry.
TA Securities Research expects the HKCC’s finding to create short-term negative news flow on Hup Seng, hence some near-term downside bias on the company’s share price performance.
“Yet we believe it would not materially derail the growth projection of the group,” opined analyst Jeff Lye Zhen Xiong in a company update.
“While we maintain ‘sell’ on Hup Seng with an unchanged DDM (dividend discount model)-driven target price of 98 sen/share at this juncture, we believe a drop in price towards 87 sen level and below would make the share more attractive to long-term dividend seeking investors.”
With a healthy net cash position of RM58 mil as of 2Q FY2021, TA Securities Research is projecting Hup Seng to distribute 5 sen and 6 sen dividend per share (DPS) in FY2022 and FY2023 respectively.
Hong Leong Investment Bank (HLIB) Research also viewed the HKCC allegation negatively as consumers might turn cautious following the news which in turn would hamper sales in the near term.
“Recall that Hup Seng’s 2Q FY2021 results already recorded a sales decline of -18% quarter-on-quarter/ 7% year-on-year to RM66.5 mil which was the lowest ever sales recorded in five years on the back of production capacity constraint,” justified analyst Syifaa’ Mahsuri Ismail.
All-in-all, the research house reiterated a “sell” rating on Hup Seng with a lower target price of 76 sen (from 81 sen previously) pegged to lower PE (price-to-earnings) multiple of 17 times (from 18 times) on mid-FY2022 earnings.
“We expect tepid sales and steeper commodity prices to impede near term profitability. The lower dividend may also cause some share price weakness as Hup Seng has traditionally been viewed as a stable dividend paying stock,” added HLIB Research.
At 9.53am, Hup Seng was down 3 sen or 3.3% to 88 sen with 4.36 million shares traded, thus valuing the company at RM704 mil. – Oct 25, 2021
