Liihen (7089) is famous because of its dividend payout ratio and net cash 🤑. However, Liihen only announced 2sen dividend in their Q4 report 2018 which is 75% lower when compared with the 2017 Q4 report which is 8sen dividend.
Why are they giving lower dividend? Lets deep dive into this company’s earnings and figure out what has prompted Liihen to lower their dividend payout.
Liihen’s net profit rose 39.7% to 21.4 million from 15.3 million last year as revenue climbed 14.71%. 💰💰💰
From the picture below we can see that they are still earning YoY revenue and also net profit but we cannot only look at their revenue and profit to judge how much a company is actually earning. So dont be angry or dissapointed when you see the company is earning money but not giving out enough cash. 💸
We need to take a look at Liihen’s cash flow to see what they are using their money for, the below picture will give you a bigger picture. They actually spent their money purchasing “property, plant and equipment” which they spent around 20 million in 2018. They are spending more this year compared to 2017 which they only spent around 12 million for “property, plant and equipment”. Their net cash has been decreasing since 2016 which is the main reason why I think that they have reduced their dividend payout. But to further check why their net cash has been decreasing will be down below.💷
These are the reasons why Liihen’s net cash has been decreasing. 🔻
1⃣ US and China trade war
✏ Higher tax results in lower profitability of the company, this is due to the tariff.
2⃣ CAPEX – Capital Expanditure
✏ They have spent extra cash on the aquisition of “property, plant and equipment” (Domain Partners Sdn. Bhd. (‘DP’)).
3⃣ Biological assets and weather
✏ In their 2017 Annual report they have also mentioned that wild animals such as wild elephants and flood & bad weather has resulted in the written off of biological assets amounted to RM1.2 million.
4⃣ Shortage of man power and escalating of labour cost
✏ effective from 1 January 2018 they have to pay levy fees but they have reduced it in the Government budget 2019 but at the same time the Gov has also increased the minimum wage which Liihen has to pay extra which has offset by the lower levy fees.
5⃣ Impairment Losses (refer to the image below to see their impairment losses)
✏ In their 2017 Annual report they have also mentioned that ROU is impaired by RM4.2 million due to the exclusion of 3,037 hectares of land from the rubber wood tree planting programme, which the group has to fork out extra cash.
6⃣ Foreign exchange loss
✏ As we know that Liihen’s biggest exports is to the US, thus Liihen is exposed to foreign currency risk on sales that are denominated in foreign currency other than the functional currency. The uncertainty
on the movement of US Dollar against RM has posed a material impact on the Group’s earnings, performance, financial condition and liquidity
✏ Due to the trade war and uncertainties recently on 2018 it has affected USD which has affected Liihen’s profitability
Hope you guys like our research, please let us know if there are any extra points to add aside the above points in the comments below. Dont forget to like and share it with your friends.😁