Saturday, 26 September 2015

Stock Review – CHINWEL(5007)(CHIN WELL HOLDINGS BERHAD)

Bursa Malaysia - 5007
Bloomberg - CWH:MK
Yahoo - 5007 .kl
Webpage - http://www.chinwell.com.my/

Key Value Investor Criteria: -

Description
Value
Criteria
Point
Price to Tangible Book Ratio
0.9*
< 1
4/5
Stock Valuation
CAPM => 2.93%
Return (2008-2014) =>13.00 %
Undervalue by 10.07%
CAPM < Return
5/5
Return on Asset
6.42*
> 0
4/5
Return on Common Equity
9.85*
> 0
4/5
Quick Ratio
2.01*
>1
5/5
Long term Debt / Total Capital
-*
<50%
5/5
Continue Dividend over Past 10 Years / Since Inception
No. 2009 no dividend paid
Yes
1/2
Cash From Operation
Positive > 5 years
Positive
5/5
Total Point


33/37
Note:
 *            Data obtain from Bursa Marketplace on 27/9/2015

By scoring 33/37 (89.19%), we will look into the annual report and the latest quarterly report of CHINWEL before making the decision to buy the stock.

Company Profile

CHINWEL has two major business segment:
1)   Fastening Products (97.22%)
2)   Wire Products (3.58%)

1)   Fastening Products

These is where the most revenue of CHINWEL come from 97.22% of 2014 profits. This division had a subsidiary in Vietnam a joint venture. This division manufacture and trade scres, nuts, bolts, and fastening product.

In 4th February 2015, 27,000,000 new CHINWEL shares is issued to acquired Asia Angel Holding limited which holds  40% of the Chin Well Fasteners (Vetnam) Co. Ltd. With these purchased Chin Well can fully recognised the profit from the Vietnam manufacturing plant.

2)   Wire Products

These is the second largest division of CHINWEL however its only contribute 3.58% of the 2014 profit. This division manufacture of precision galvanized wire, annealing wire, bright wire, hard drawn wire, PVC wire, bent round bar and grill mesh.

PROS:
è By acquiring Asia Angel, CHINWEL able to recognised the 40% of profit which control by the NCI last annual report. (RM 8,789,262.00 from 2014 annual report)
CONS:
è  Acquiring Asia Angel through addition of issued shares had dillute the share price of CHINWEL.

Geographical Segments

From the annual report 2015, we can understand CHINWEL obtain most of its revenue from the EURO market (57.79%) followed by (23.61).
Since CHINWEL focus much on the Euro market the economy in Euro zone will affect the revenue of CHINWEL. According to economist .com the second quarter (March – June 2015) of Euro has slowed down from 0.4% (previous two quarter) to 0.3% despite the European Central Bank doing quantitative easing. These is mainly due to the falling of energy price and slowdown of Chinese market.

The depreciating of Ringgit Malaysia to Euro (13% since June 2014) and US Dollar (32.4% since June 2014) since June 2014) will help to improve the revenue of CHINWEL since they account receivable from 2014 annual report is based in US dollar (47.56%), Euro Dollar (16.78%).

However the depreciation of Ringgit Malaysia to Vietnam Dong (32.45%) might increase the expenses of CHINWEL because they have operation in Vietnam. 55% of the trade payable from the 2014 annual report is in Vietnam Dong.

PROS:
è The depreciation of Ringgit Malaysia to Euro and US Dollar might help to increase the revenue of CHINWEL.
CONS:
è Despite the European Central Bank doing quantitative easing. The Euro zone for second quarter 2015 is slowed down.
è The depreciation of Ringgit Malaysia to Vietnam Dong might increase CHINWEL expenses.

Director of the company

CHINWEL is owed and manage by Tawainese family, the Tsai Family. Tsai Yung Chuan is the fouder and the managing director of the company. The company Chairman, Mr Lim Chien Ch’eng start to acquire the company shares from total shares of 7,626,664 (direct and indirect) 214 annual report to 7,667,964 (direct and indirect) since last purchase in 19 August 2015.

On 22 Jun 2015, the CHINWEL major shareholder (indirect) and one of the founder, Mr Tsai Yung Yu had cease all his shares. These is because he sold the 32.6% of his shares in Benua Handal, which owned 58.9% of CHINWEL to his brother Mr Tsai Yung Chuan according to The Star. These might not cause major effect to CHINWEL since Mr Tsai Yung Yu is not the active in the company.

PROS:
è The managing director of the CHINWEL is also the founder of the company in 1989. He had proven himself by managing CHINWEL for 26 years.
è CHINWEL chairman Lim Chien Ch’eng acquired more shares meant he is confident on these company.

Financial Statement

Based on the unaudited report for financial ending 30-06-2015, CHINWEL has increase its cash equivalent balance from RM 47,934,000 to RM 55,164,000. Besides that, CHINWEL also manage to reduce the borrowing from RM 73,138,000 to RM 53,011,000.
The net cash from operating activities is also increase from RM 53,923,000 to RM 60,572,000.

PROS:
è The increase of cash equivalent and reduction of borrowing shows the company is in good financial health.