• Manufacture & sales of garment.
  • Original Equipment Manufacturer (OEM).
  • Major client – Nike (Contributes around 78% of total revenue FY2016).
    • Relationship since 1985.
    • Tier-1 woven manufacturers worldwide.
  • Similar industry competitor – PRLEXUS.

  • Compound annual growth rate, CAGR for the past 5 years  (2012-2016).
    • Revenue : 12.45% (17.44% 10Y)
    • Net profit : 27.95% (38.71% 10Y)
    • EBIT : 27.14% (34.16% 10Y)
  • Average free cash flowFCF for the past 5 years : RM28.89m.
    • Average capital expenditure, CAPEX for the past 5 years : RM4.75m.
    • Growth sustained by internal cash flow generation (No debts).
  • Growth plans
    • Annual capacity of 35.6m pieces (70% utilisation rate)
      • Plans to expand to 50m pieces by 2020.
        • Phase 1 (6m pieces capacity) is expected to be ready by June 2017, costing USD10m.
        • Phase 2 (6m pieces capacity) expected to cost about USD8m will be undertaken on a joint venture basis (FY2018).

  • Expected dividend yield is around 4.6% based on the stock price RM4.32 (17/12/16).
  • Cash per share : RM0.84 [Investment securities (RM74.13m) and cash (RM62.65m) – 2QFY17].
  • Value of RM5.36 (EPS ttm: 59.6 cents) based on a PER of 9.0x, which is a 10% discount from the industry average PER of 10x.
  • Sum-of-Parts (SOP) methodology is used, which yields a fair value of RM6.2.
  • Discounted cash flow analysis using the average FCF of 5 years with 5% growth and 8% discount also yields RM6.21.
  • Margin of safety : RM1.88.

Sources:
  1. Latest research report by Public Investment Bank dated 19 April 2016 here.
  2. For a more detailed analysis, refer to this link. It is dated 4 November 2015 by Inter-Pacific Research Sdn Bhd (member of the Berjaya Corporation Bhd Group).

Notes:
This post was prepared to be used solely for blogging purposes. It is not to provide investment advice or a solicitation of such an offer. As an investor, you should thoroughly research any security before making any investment decisions.