Willowglen MSC Bhd
We like Willowglen for its growth prospects, asset-light business model that is highly scalable and strong cash from operations. With some 83% of revenue derived from Singapore, the company will also benefit from the strengthening Singapore dollar.

Willowglen is a leading provider of Supervisory Control and Data Acquisition (SCADA) solutions, a system used to monitor and control industrial processes and facilities in various industries such as power plants, transportation, oil and gas, water and wastewater, and municipal and building service.

It is well established in Singapore where major clients include the Housing and Development Board of Singapore (HDB), Singapore Power and Public Utilities Board of Singapore. Domestic clients include Prasarana Malaysia and Petronas Gas.

Turnover grew at a CAGR of 23.4% from RM54.5 million in 2010 to RM102.6 million in 2013, underpinned by strong growth in its Singapore operations. Whilst Willowglen reported lower y-y earnings in 9M2014, this was due, primarily, to upfront spending to cater to future growth. As such, we expect earnings to pick up smartly going forward.

In November 2014, Willowglen secured a new two-year contract worth RM14.2 million from Singapore Power. With growing need for public safety and protection of assets, it stands to benefit from the development of infrastructure facilities and high-rise buildings in both Singapore and Malaysia.

The Edge Research rates it a Fundamental Score of 2.55 out of 3. It has a sturdy balance sheet — net cash stood at RM55.9 million or 23 sen per share as at end-Sept 2014, up from RM37.7 million in FY2010 — and EBITDA margin of over 21%. In 2013, ROE was a high 24.5%.

Annual dividends ranged from 2 to 3 sen per share since 2009.

The stock is trading at a trailing 12-month P/E of 9.8 times and 1.9 times book.

This article first appeared in The Edge Financial Daily, on January 15, 2015.