TOTAL value for my portfolio was up 1.1% last week, outperforming the broader market where trading was, by and large, listless. The FBM KLCI gyrated within a narrow band through the week before closing marginally higher at 1,845.9.

Shares for Willowglen (Fundamental: 3/3, Valuation: 0.9/3) have performed very well this month. The stock closed 3.4% higher last week.

To recap, Willowglen is a leading developer of Supervisory Control and Data Acquisition (SCADA) systems and integrated monitoring systems (IMS). It provides computerised monitoring and control services mainly to the utilities industry as well as building services.

Earnings fell 10% last year, due to higher R&D expenses and manpower cost. But I expect these to translate into greater business volume and higher earnings going forward. Despite the drop in earnings, ROE remained high at 18.8% in 2014.

The company recently announced two new contracts worth some RM9 million from Singapore’s Public Utilities Board. The contracts involve the construction and maintenance of the supply, installation and commissioning of pressure and water quality sensors. It derived over 70% of sales from Singapore in 2014, with the balance from domestic market.

Willowglen has a debt-free balance sheet with cash of RM50.9 million or roughly 23% of its market capitalisation.

The stock is trading at fairly attractive trailing 12-month P/E of less than 13 times, which will narrow as earnings rebound this year. A first and final dividend of 2 sen per share (ex-entitlement on May 13) translates into a decent yield of 2.2%.

Last week, I acquired 14,500 shares in OKA Corporation at RM1.03 per share. The stock is one of InsiderAsia’s Top 10 picks for 2015.

OKA is based in Ipoh. It is one of the biggest manufacturers of pre-cast concrete products — such as pipes and culverts used for drainage in highway construction and townships — in the country. The company currently has five factories, strategically located in proximity to major demand centres around the peninsula.

Turnover has grown steadily by 8-10% per annum since 2010. For 9MFYMar2015, turnover was up 10.8% y-o-y to RM119.8 million while net profit expanded an outsized 57% to RM13.3 million. This was due to increased sales of higher-margin customised products during the period. Whilst the expanded margins may not be sustainable, depending on future product mix, I believe its business will continue to grow.

OKA offers investors exposure to the raft of major infrastructure projects, including the RM5 billion West Coast Expressway. Some of the projects it previously supplied to include KLIA 2, MRT and LRT, Pasir Panjang Terminal in Singapore, East West Highway, Karak Highway and Damansara-Puchong Highway.

The pre-cast concrete market is competitive and margins are fairly transparent, and consistent.

OKA’s advantage is that it has a wide product range, which is certified by all the relevant government authorities, and the production capacity to deliver in quantity. Also, its strong balance sheet — minimal gearing — allows it to carry a range of standard stock items, which will shorten delivery times.

Management is sound, led by its founder, whose family owns a combined stake of over 57% in the company.  

Its shares have done very well in the past six months. Nevertheless, valuations are still decent at trailing 12-month P/E of just 8.6 times. Dividends for FY2014 totalled 3 sen per share, translating into net yield of 3.3%.

Following the acquisition, my portfolio is now 74% invested.

Last week’s gains raised my portfolio’s total returns to over 11.3% since inception. I continue to outperform benchmark index, which is up by a mere 0.9% over the same period.

This article first appeared in The Edge Malaysia Weekly, on April 20 - 26, 2015.

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