Chin Well (1)

Manufacturer of Screws, Bolts & Nuts

Publish date: Wed, 23 Jul 2014, 11:43 AM 

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1. Introduction

Founded in 1989, Chin Well is today one of the world’s largest manufacturers and suppliers of high-quality carbon steel fasteners (i.e. screws, nuts and bolts).

Through production facilities in Malaysia and Vietnam, Chin Well manufactures and supplies fasteners that are primarily utilized in highway guard rails, power transmission towers, furniture and other applications.

In addition to serving the requirements of the domestic market, Chin Well established an international customer base from South East Asia (SEA) to Europe and the Middle-East to date.

2. Production Facilities

Located at Bukit Mertajam, Butterworth, Vietnam :-

3. The Group's Products

(a) Screws

Hexagon wood screws, self drilling screws, drywall screws, machine screws, furniture screws, chipboard screws, cap screws.

(b) Bolts & Nuts

Flat washers, Hexagon bolts, structural bolts and nuts, hexagon nuts, TC bolts, etc.

 

4. Basic Financial Information

Based on 273 mil shares outstanding and share price of RM1.40, the company has market cap of RM382 mil.

Based on historical net profit of RM28.4 mil, PE multiple is 13.5 time.

Based on net assets of RM366 mil, cash of RM43 mil and debts of RM66 mil, net gearing is 0.06 times only.




5. Historical Profitability

FYE June	2009	2010	2011	2012	2013	2014E
Revenue	368	404	502	502	462	476
Net profit	2.8	13.9	35.5	47.6	22.3	27.1
Net margin (%)	0.8	3.4	7.1	9.5	4.8	5.7
EPS (Sen)	1	5.1	13	17.5	8.2	10.0
DPS (sen)	0	1.6	3	2.5	3	n/a
payout ratio (%)	0.0	31.4	23.1	14.3	36.6	n/a
Div yield (%)	0	1.5	2	1.9	2.8	n/a

6. Segmental Breakdown

The bulk of the group's products are exported (Malaysia 24%, Vietnam and others 11%, Europe 57%, others 8%).




7. Factors That Can Affect Profitability


(a) Anti dumping duties - Europe imposed 85% anti-dumping duties on China based producers, thereby  benefiting Chin Well (Europe contribution increase from 26% to 57% as a result). It is expected that Europe will extend the anti dumping duties for another 5 years in OCtober 2014.


(b) Malaysia duties on imported raw material -  Chin Well imports wire rods from China, Taiwan and Korea as raw material. The government imposed 25% tax on those wire rod products, causing rise in Chin Well's production cost and affect its export competitiveness.


(c) Foreign Exchange Fluctuation - Strong US Dollars / Euro will benefit Chin Well.


(d) GST - 6% GST tax effective April 2015 will benefit Chin Well as existing sale tax is 10%.


(e) Labour Shortage - Chin Well's Bukit Mertajam plant has capacity of 8,000 MT but only producing 4,000 MT per month due to non availability of foreign labour (failure to obtain premits from government).


(f) Raw Material Cost - Increase in wire rod and other raw material price will adversely affect the group's competitiveness / profitability.

(source : The Star 18 July 2014)



8. Major Shareholders

Major shareholders are Taiwanese nationals.

9. Concluding Remarks

All eyes will be on coming October's announcement by EU regarding anti-dumping duties on China based products. 

Other than that, the stock is trading at 13 times PE multiple and 3% dividend yield. Maybe a HOLD