Stock Review – ASIAFLE (7129) (ASIA FILE CORPORTATION BHD)

Bursa Malaysia - 7129

Bloomberg - AF:MK
Yahoo - 7129 .kl
Webpage - http://www.asia-file.com/

Company Profile

ASIAFLE primary engage in manufacturing and trading of various filling, stationary products, colour paper and boards. The company consists of five production and warehouse site in Malaysia, two files producing plants and one paper mill located in United Kingdom and another two production facilities in Germany. It premier brand “ABBA” is the leading brand name in Malaysia.

1) Geographical Information

According to annual report 2017, ASIAFLE having non-current asset in two region;

1) Europe – 61.11 %

2) Malaysia – 38.89 %

ASIAFLE revenue received from customer are as follows:

1) Europe – 79.13 %

2)   Malaysia – 9.60 %

3)  Others – 5.19 %

4)  America – 3.38 %

5) Asia (exclude Malaysia) – 2.7 %

The operation in Europe did well compared to Malaysia as report in 2017 Annual report operation in Europe had asset turnover ratio of 3.31 compared to operation in Malaysia which had asset turnover ratio of 0.63.

2) Major Customer

ASIAFLE has a major customer which contributed 16.12 % of the 2017 revenue.

PROS: è ASIAFLE has a premier brand “ABBA” which is well known in Malaysia. è ASIAFLE had most non-current asset 61% in Europe which able to produce almost 80 % of its revenue for 2017. CONS: è ASIAFLE 2017 revenue almost 80 % from Europe hence it mainly depend on the currency exchange rate between Malaysia Ringgit and Euro Dollar. è A major customer contributed 16 % of the 2017 revenue.

Financial Statement

ASIAFLE had Intangible assets which stand 4.83 % of the total asset for financial year 2018.

There is a significant drops on trade and other receivable from RM 82,656,190 in 2016 to RM 69,281,873 in 2017 (RM13,374,317 or 16.18 % drop). These is mainly due to RM 39,531,554 / 10.14% drop in revenue on 2017. According to Dato’ Lim Soon Huat chairman statement in 2017 annual report, the 10.1 % of revenue drop is due to the shift in procurement to local sources by some of the major customer in USA.

The increment on other investment in 2017 is mainly due to the increase of market value of financial asset.

CONS

è ASIAFLE had intangible asset almost 5 % of the total asset for the financial year of 2017. è Shift in procument to local source by some major customer in USA which cause 10.1 % revenue drop in 2017

ASIAFLE bank borrowing are foreign currency loan denominated in US Dollar and are subject to interest rate ranging from 1.38 % - 1.95 % compared to lower rate from 0.65 % to 1.52 % in 2016

CONS

è Bank Borrowing denoted in USD and increase of US interest rate.

Financial Ratio

Description	2017	2016	Different
Gross Profit Margin	0.40	0.41	-0.01
Net Profit Margin	0.16	0.20	-0.04
Interest Coverage Ratio	199.44	332.45	-133.01
Effective Tax	0.21	0.22	-0.01

Dividend and Bonus Issued for the past five year

ASIAFLE had constant dividend for the past five year from 2013 – 2017 with the average dividend of RM 0.192 with the dividend yield of 7.01 % (base on closing price 18 July 2018 RM 2.74).

PROS: è ASIAFLE has dividend yield of 7.01 % which is higher than fix deposit rate of 3.15%

Market Research

Insider Asia (4 June 2018)

Price Target : RM 2.74

• Revenue down on softer demand from local and oversea market
• Operation margin improved but PBT lower
• Attractive dividend yield
• Minimal contribution from soft launch of disposal foodware

Maybank Investment Bank (1 June 2018)

Price Target : RM 3.13

• Rising raw material cost
•  Lower sales from both local and oversea market
•  Expected to start selling new disposable foodware product at the end of 2018.
•  The stock continue to offer >5% dividend yield

Estimated Price

IVKLS Price : RM 2.27

Peers

1) IJACOB

2) PELIKAN

3) SOLUTN

4) EURO

5) FIHB

6) KOMARK

7) AHB

8)TAFI

9) EMICO

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