Kawan Food Bhd (-ve)

KAWAN (Fundamental: 3/3, Valuation: 1.1/3) is Malaysia’s leading manufacturer and exporter of frozen food. The company’s products such as roti paratha, chapatti, naan, and puff pastry are sold under its own brands, namely Kawan, KG Pastry, Veat and Passion Bake. 

Kawan is likely seen as a beneficiary of the stronger USD as well as the economic recovery in the US. Export, mainly to the US, accounted for 58% of sales in 2014. 

Its share price has risen by 44.0% since announcing 1Q2015 earnings results. For 1Q2015, revenue rose 8.6% y-o-y to RM37.3 million, while net profit surged 32.9% to RM5.6 million, boosted by higher demand and forex gains. 

Kawan intends to consolidate its existing operations to a new 15-acre factory in Pulau Indah, Port Klang. Once completed by end-2015, its production capacity will be five times that of its existing plants. 

The stock trades at a trailing 12-month P/E of 22.39 times and 3.13 times book.

This article first appeared in The Edge Financial Daily, on June 11, 2015.