Chee Wah Corporation Bhd (-ve)

CHEE Wah (Fundamental: 0.6/3, Valuation: 1.5/3) triggered our momentum algorithm for the third time since August 12, rising 12.7% during the period to close at a 1-year high of 62 sen yesterday. 

The rarely traded stock saw a surge in investor interest, with some 133,000 shares changing hands, compared to an average of only 6,240 shares traded over the past 200 days.

Established in 1959 as a trading company, Chee Wah has grown into a fully integrated manufacturer and distributor of stationery. Its products, sold under established brands of ‘CAMPAP’ and ‘FOREST’, include spiral note books and note pads, files, hard cover books and gift wraps. 

Penang-based Chee Wah exports to over 50 countries, offering products under Original Brand Manufacturing, Original Equipment Manufacturing and Original Design Manufacturing agreements. 

Notably, export, which contributed an increasing proportion of sales since FYJune2010, overtook domestic sales in FY2013. For FY2015, export accounted for 71.3% of sales, up from 62.5% the previous year. 

The company was loss-making from FY2010-FY2013. It returned to the black in FY2014 with a small net profit of RM135,235, due mainly to higher export sales and a successful rationalisation and streamlining exercise which started in FY2011. The exercise saw the disposal of two subsidiaries, which were involved in the manufacturing and trading of paper bags and related packaging products. The company also shut down its five loss-making retail outlets.

For FY2015, revenue grew 7.2% to RM95.3 million, thanks to higher export sales. Net profit increased 21-fold to RM2.9 million. 

Notably, last month, Chee Wah proposed a first and final dividend of 2 sen per share — its first since FY2003. The proposed dividend is subject to shareholder approval at the upcoming annual general meeting. 

The stock trades at a trailing 12-month P/E of 8.4 times and 0.5 times book.

This article first appeared in The Edge Financial Daily, on September 22, 2015.