Sunday, 27 September 2015

Chin Well Holding Berhad (Recession Proof Exporter)


Chin Well Holding Berhad (Recession Proof Exporter)


Chin Well Holdings Berhad (CWHB) is a Malaysia-based investment holding company. The Company, through its subsidiaries operates in three segments: fastening products, which include the manufacturing and trading of screws, nuts, bolts and other fastening products; wire products, which include the manufacturing of precision galvanized wire, annealing wire, hard drawn wire, polyvinyl chloride (PVC) wire, bent round bar and BRC wire mesh, and investment holding.


Excluding Malaysia & Vietnam (main factory) which business is dominated in local currency (MYR, VND), Chin Well remaining 74.8% business is export, which is mainly dominated in Euro & USD. A recent appreciation in EURO and USD contributes a positive impact on the company in term of profit margin. While on the other hand, most of their costs are source locally, which promises a better earning prospect for FY16.






Key Statistic (Millions)
2013
2014
2015
Cash and Equivalent
30.70
47.93
55.16
Total Asset
549.25
556.74
571.55
Total Liabilities
144.27
117.14
123.55
Borrowings
85.46
73.14
53.01
Shareholders Fund
404.98
439.60
448.00
Book Value Per share
1.30
1.39
1.58
Net Cash
(54.76)
(25.21)
2.15
Cash Per share
0.11
0.17
0.19
NTAPS
1.30
1.39
1.58
Total share outstanding
    272.53
   272.53
   283.51





Key Ratio and Statistics
·         Total Asset RM571.5 million, Total Liabilities RM123.5 million, Total Equities RM448 million
·         Cash Per-Share RM0.19
·         Zero gearing/ Net cash, note that Chin Well finally turn into a net cash company in FY15 (note that, the company make an effort to reduce company gearing yearly)
·         Book Value Per-share RM1.58, Price to book value 0.90 times, which is very low (based on current price 1.42)
·         Reserves which is qualified for 1 for 1 bonus issue
·         Price to earning 10.3 times (based on current price 1.42)
·         Debt to Equity ratio 0.27x
·         Return on Equity 9.3x
·         Dividend Pay-out policy 40%


Chin Well (Completing they cycle of European recovery)
Chin Well business possesses its own defensive unique. In almost every major sector in the economy (automotive, construction, property development, furniture, oil & gas, technology) consumes Chin Well products. Based on the revenue breakdown above, we can see more than 56% of Chin Well products are exported to the European countries. While the extension of EU anti-dumping duty to the china fastener manufacturer for 5 years (March2015- March2020), grant Chin Well a big favor in term of business market share, as it is one of the eight companies in Malaysia that is exempted from this regulations.
The recent drop in the steel price furthermore boosts the company profit margin, as the raw material is accounted for 70% of its production cost. ECB Quantitative Easing, continues to spur European economic growth, and it is deems a great opportunity for the company to position itself for a greater and a better FY16 prospects. 
As according to the Executive Director Tsai Chia Ling, GST effect does them a favor as they could save up 4% of the tax rate as their current sales tax is at 10%. Other than that, according to her, Chin Well Vietnam plant operates at 90% capacity while Malaysia plant 50% capacity, which literally gives them an opportunity to cater their customer upcoming demand.

Recap
Chinwel, is a lagging exporter company yet to be discovered, Net cash with good dividend yield and amazing future prospect.

Price 1.40
Target 1.70


1 comment:

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