April 3

What Investors need to Know about Chin Well Holdings Berhad (KLSE: CHINWEL)

A couple of days back, we conducted a poll on our Facebook page, asking for your favourite stocks for us to write on.

And the results are out for this week! Chin well holdings and UMS Holdings are the top 2 contenders!

Therefore, in this article, we present you with the hot favourite stock from the poll – Chin Well Holdings Berhad (KLSE: CHINWEL).

Company Profile

Chin Well is a metal fabrication company which deals with the manufacturing and trading of fastening and wire products. Through production facilities in Malaysia and Vietnam, Chin Well manufactures and supplies fasteners global fasteners that are primarily utilized in highway guard rails, power transmission towers, furniture and other applications. Its wire products segment manufactures products which includes precision galvanized wire, PVC wire and grill mesh.

It is also an investment holding company, engaging in the provision of financial investment services. Its market capitalisation stands at MYR 530 million.

Financials

Based on its fiscal year results ending June 2016, Chin Well has experienced a healthy 23.5% growth in its gross income from MYR 87 million in 2015 to MYR 107 million in 2016. This is due to a slight increase in revenue earned, accompanied with a decrease in COGS of 3.5%. As such, earnings per share rose from MYR 0.14 in 2015 to MYR 0.21 in 2016, which translate to a whopping 47.19% increase in a year!

However, according to this article, the company is expecting a decline of at least 10% in its export sales due to stiff competition from China-made products. Apparently, it is already posing a significant threat to Chin Well’s market share as these China products were able to undercut the their prices by 15% lower. This is exacerbated by a rise in cost of raw materials for fastener production, which puts Chin Well in a dilemma.

In fact, in its latest quarterly earnings, its revenue and profits are both down 9% and 26.% respectively. That said, the company’s financial position seems to be in good hands with its debt/equity ratio standing at 0.23. What is worth noting is that the company has also been free of any long-term debts since year 2014. Furthermore, with a cash ratio of 1.25, its pool of cash is more than enough to pay off its current debts.

Conclusion

According to a report from Transparency Market Research on industrial fasteners, the global industrial fasteners market is progressing at a compounded annual growth rate of 5.40% between 2012 and 2018.

Nonetheless, Chin Well may not even be able to take part in the industry growth if it continues to experience cutthroat competition from low-cost competitors in China. But given its minimal debt obligations and strong cashflow position, it may still be a company worth a second look.

Chin Well’s P/E ratio last stood at 10 and it provides an estimated dividend yield of 4%. A gentle reminder to all interested investors, its fiscal year results will be released on 25 May 2017.

Once again, we appreciate all of your responses on the facebook surveyDo let us know what other stocks you want us to write by completing the simple poll!

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