Insider Asia’s Stock Pick: Willowglen MSC

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Willowglen MSC Bhd

WILLOWGLEN provides systems and solutions for Supervisory Control and Data Acquisition (SCADA),a computerised system for gathering and analysing real time data system.

The company’s products cater to a wide range of industries, such as transportation, oil and gas, water and wastewater, and municipal and building services. Its major clients include the Housing and Development Board of Singapore (HDB), Singapore Power, Public Utilities Board of Singapore, Prasarana Malaysia and Petronas Gas.

Willowglen derived 82.6% of its revenue in 2013 from the Singapore market, followed by Malaysia with 17.1%. For its Indonesia operations, which are at development stage, the company will focus on providing SCADA and security solutions to data centres, utilities and the oil and gas sector.

Willowglen has a strong, cash rich balance sheet. As of 2Q2014, net cash stood at RM53.6 million or 22 sen per share, amounting to 30% of its current share price of 73.5 sen. It has very high net profit margins, ranging between 16.3% and 18.9% over the last four years.

For 2013, revenue increased 23% to RM102.6 million while pre-tax profit rose 27% to RM23.1 million. Sales from Singapore and Malaysia operations surged 23.4% and 19.2% respectively.For 1H2014, revenue increased 13.1% to RM48.8 million, up 13.1%, while pre-tax profit inched up 6.6% to RM9.7 million.

Prospects for the company appear positive. The SCADA market is growing strongly, given the increasing need for real time performance monitoring of geographically diverse assets.  Willowglen is already well established in Singapore and is growing its operations in Malaysia - in particular targeting the major projects in Johor - and is trying to penetrate more into Indonesia.  The stock is trading at a trailing 12-month P/E ratio of 9.2 times and a P/BV of 2.1 times. Dividend per share was 3 sen in FY2013, translating into a yield of 4.1%.

This article first appeared in The Edge Financial Daily, on October 14, 2014.