Willowglen Msc Bhd

WILLOWGLEN (Fundamental: 3/3, Valuation: 0.9/3) rose as high as 92.5 sen, or up over 25% after it was first highlighted by InsiderAsia at 73.5 sen on October 14, 2014. Since then, the stock retraced to a low of 63 sen, partly due to its 3Q2014 earnings results, before rising again to 89.5 sen.

We still like Willowglen for its highly scalable, asset-light business model and expect double-digit earnings growth going forward.

The change in management at Willowglen back in mid-2013 appears to begin bearing fruit. In the last five months alone, the company has won five contracts worth RM43.8 million from Singapore Power Group (SPG) and its subsidiaries SP PowerAssets and PowerGas, and Public Utilities Board of Singapore.

Wong Ah Chiew, former Managing Director of PJ Development Holdings, took over the helm at Willowglen on August 1, 2013 and set his sights on business expansion. In February 2014, the company acquired a 70% stake in Sentinel Systems Sdn Bhd (SSSB) for RM1.4 million. The main asset of SSSB is an Innowatch system that is able to control operations at remote places, with proven success in managing ports in Korea.

Having built a strong foothold in Singapore, Willowglen intends to not only grow its operations there, but to also focus more on Malaysia, where opportunities abound for the internationally competitive player. Last year, Wong expanded the R&D team in Malaysia by 40%. It is expected to benefit from government infrastructure spending such as the construction of the Klang Valley MRT, LRT extensions and water treatments.

The stock trades at a trailing 12-month P/E of 12.4 times — which is attractive relative to its prospective growth — and 2.17 times book. Dividend totalled 2 sen (ex-date May 13) in 2014, translating into a yield of 2.2%.

This article first appeared in The Edge Financial Daily, on May 5, 2015.