KLSE : DKSH       DKSH HOLDINGS(M)BHD Main : Trading&Services
Last Price Today's Change   Day's Range   Trading Volume
5.24   -0.02 (0.38%)  5.24 - 5.28  228,100
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Market Cap: 827 Million
NOSH: 157 Million
P/E | EY: 17.53  |  5.70%
DY | Payout %: 1.81%  |  31.74%
NAPS | P/NAPS: 3.2837  |  1.60
Avg Volume (4 weeks):85,564
4 Weeks Range:4.40 - 5.28
52 Weeks Range:3.68 - 6.67
Average Price Target: 7.00
Price Target Upside/Downside: +1.76


Latest Headlines
07/02/2017  DKSH- A prelude to strong 4Q16?
02/12/2016  DKSH should still be a strong company - felicity
23/11/2016  Daily technical highlights - (DKSH, KRONO)
12/10/2016  RHB Technical Research - DKSH (5908)
12/10/2016  Daily Technical Highlights – DKSH | CANONE
30/09/2016  DKSH: Why a company with 1% net margin deserves to trade at 20x PE?
29/09/2016  DKSH: Leading Market Expansion Services provider
29/08/2016  Stock With Momentum: DKSH Holdings (M)
25/08/2016  DKSH: 1H2016 webcast - felicity
25/08/2016  利直南写1年闭市新高
24/08/2016  (Icon) DKSH - Sexy Turnaround Story. This Company Has Moat And Unlimited Growth Potential
24/08/2016  M+ Online Market Pulse - Mild Recovery - 24 Aug 2016
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  6 people like this.
solomin Hi sumato, how do you calculate RM12m net profit if excluding one-off impairment. Kindly advise, ty.
29/11/2016 00:11
sumato88 Reported pat + impairment net of tax = 5.4 + (9.7 x 70%) = 12. The tax rate is about 30% (2.3/7.7) in this quarter
29/11/2016 09:02
halia sell all.....no more keeping
29/11/2016 09:42
IamGoogle PE 15 times for such business with less than 1% net profit margin, what a mad
29/11/2016 16:51
IamGoogle Transport charges increased 5% then will have no more profit ?
29/11/2016 16:52
IamGoogle So, the price goes back where it was, that's before Icon8888 trumpeting LOUD LOUD, RM4.50
29/11/2016 16:54
IamGoogle Welcome back, price.
29/11/2016 16:54
michaelwong All badly hunt down with bruises . ......mampus . ...mampus !!!
29/11/2016 18:05
Tai KT If you want to chase high, always set you cut loss point count from the new high point. 10,15 or 20 % off from new high 6.4. You may prepare to loss instead of trap to be deep.
29/11/2016 22:01
paoblocrk I believe in DKSH..... sumatoo88, I have the same view with you, it is over-reaction, at this price I think I will also buy a few to keep.
29/11/2016 22:59
Mat Cendana Good analysis by @sumato88. I don't have any shares in DKSH but I'm looking to come in. The problem right now is the trend. Exacerbated by weak holders panicking. Must wait for the counter to find equilibrium first. I believe it will be sooner rather than later. After the weak holders have left.
29/11/2016 23:22
Risk Rider Don't simply said those sellers are weak holders, you don't know anything but simply assuming these are weak holders, it is biased judgement.
29/11/2016 23:26
Risk Rider You are also assuming those buyers are smart holders, then who you are? Smart holders or Weak holders? Or you are not both? You are just ordinary holder?
29/11/2016 23:27
solomin sumato88 Reported pat + impairment net of tax = 5.4 + (9.7 x 70%) = 12. The tax rate is about 30% (2.3/7.7) in this quarter
29/11/2016 09:02

Thanks for the explaination!
29/11/2016 23:51
solomin Will continue to hold it and accumulate slowly :)
29/11/2016 23:51
cjcj buy when people fear, sell when people greed
30/11/2016 09:44
sumato88 DKSH's market cap is about rm748m now. For a distributor, net working capital is always the major capital and also as liquid as cash. Anyone who wants to buy out the company has to take that into consideration. So if you minus the net working capital of rm489m (net of debt), the biz model valuation is only 4.3x Pe (rm748m - Rm489m)/ rm60m). So is that cheap enough for u? That is the basis of Distributors' valuation which has always been valued btw high teens and 20ish PE multiple. Remember, once a distributors is entrenched, it is very difficult for the new entrant to come in.
01/12/2016 09:38
Mat Cendana That part is very true. The abbreviation might obscure the name for some people. Diethelm especially. It's not like anyone can easily come in to challenge. Well, they can. But unseating an entrenched incumbent will always be tough.

The price looks to have stabilised. The weak holders appear to have left.
01/12/2016 13:33
solomin http://www.intellecpoint.com/2016/12/dksh-should-still-be-strong-company.html
02/12/2016 00:01
solomin Good article by Felicity.
02/12/2016 00:01
Risk Rider Profit margin too low, anything happen like few millions provision for doubt debts can kill off the bottom line, risky business.
02/12/2016 00:16
sumato88 This is a misunderstanding, the co always mark up a margin for a product that they distribute, typically gross profit margin is about 8-9% and I think 9M16 gross profit margin is closer to 9-10% after the change of telco clients. So for rm5.5bn revenue, gross profit should be about rm495-550m. This profit is very certain. The co core operating cost was about rm400m in fy15, which management mentioned there were some startup cost for moving office and distribution centers. So the actual operating cost should be lower and the key is how do they manage the operating cost going fwd when revenue do not grow. If revenue continue to grow 5-7% p.a. (This is the 10 yr historical growth rate), the co will make additional rm21m-27m gross profit. If the co manage to control its operating cost which it seems to be stable, according to the recent quarter results, the incremental gross profit will flow to the bottomline. Well, some may ponder why the operating cost will not grow more than revenue. The logic is simple, you have a truck deliver 10 products to AEON JUSCO, next mth u secure new client or new product to distribute to the same channel. So do u think the cost will increase like the volume increase? The answer is no, u probably will only incur additional 60% cost for a dollar additional gross profit. That's the beauty of a distribution biz, the operating leverage is very good, as long as u can manage the operating cost which DKSH seems to be able to. Exceptional provision for doubtful debt is indeed bad to the p&l giving its thin net margin. But historical trend proved that the receivable risk is low, as I mentioned earlier, the avg provision for doubtful debt over the past 5 years was only rm0.2m per annum. So how can we call the biz model risky when it's revenue is in the billions.
02/12/2016 11:43
cjcj Agreed with sumato.
02/12/2016 12:15
paoblocrk wow.. Sumato88 what you have said just make sense to me.... are you an accountant in nature? or if your job nature in this kind of distribution industry (i.e B2C )? To defend DKSH for so many valid points really make one think u are a strong believer in this DKSH business, and for that, I will try to buy few lots for investment. lolx

I am no expert in DKSH business but so far I saw the vaccine/medicine deliver to hospital are professionally packed and hospital love to buy their products compared to pharmaniaga or GSK.
02/12/2016 14:53
stockmanmy DKS is a solid solid company operating in a tough environment.
02/12/2016 14:56
sumato88 Hi, Paoblocrk. I am an accountant...
03/12/2016 12:58
paoblocrk Kudos to you... wow you are really a competent accountant which can really articulate and use your professional knowledge in the analysis in DKSH...May I ask what industry do your practice your professional service? I think the group chat will somehow benefit from you analysis at least for me..... keep it up! I try to contribute if I can but I think I am not at your level yet. Haha
03/12/2016 23:03
sumato88 Thanks Paoblocrk. I am in the FMCG industry. Just sharing what I know and believe.
04/12/2016 20:42
greatful roller coaster counter
06/12/2016 19:13
Risk Rider Thank you for taking your time to explain, truly appreciate that, sumato88. However, historically, the business model of the company has generated only about 1%-2% net profit margin for the past 10 years, that won't change over night.

To be frank, this is not my cup of tea but I like the discussions over this forum. Keep it up, guys!

sumato88 This is a misunderstanding, the co always mark up a margin for a product that they distribute, typically gross profit margin is about 8-9% and I think ...........................................
................................................ So how can we call the biz model risky when it's revenue is in the billions.
02/12/2016 11:43
06/12/2016 23:02
IamGoogle Mr Market realised the true stock value via the movement of share price, previous up was overcooked as the meat was too thin to be shared among.
13/12/2016 13:42
IamGoogle Only those businesses with good & healthy profit margin can get through the storm, those command little 1 or 2 percents only will be badly hit.

Don't bother to look at those less than 1% like BINA PURI which has been highly recommended & promoted by the famous Calvin Tan
13/12/2016 13:46
PlsGiveBonus falling knife
13/12/2016 14:45
TabulaRasa sumato88,

Thank you for your clear & insightful analysis of DKSH.

Just to clarify your statement that DKSH's net working capital is a good and liquid as cash, are you saying this on the basis that DKSH's contracts with its suppliers allow it to 'resell' its inventories back to them if unsold after a certain period and they don't take inventory risk?

I am not sure if this is the case.

Furthermore, the recent impairment of receivables also highlights the risk of non-collection, despite the strong credit controls of DKSH.

When you mentioned that the PE of other Distributers are between teens to 20s, presumably you have not made similar adjustments to the net working capital, right? If we were to compare like-for-like, DKSH's current PE of 15 is within the range you quoted.
13/12/2016 14:46
sumato88 Tabula,

my belief of net working capital is as good as liquid as cash is based on
1) majority of the receivables should be due by modern on trade retailers such as Aeon/Tesco etc with the smaller exposure to mom&pop shops, which is the general retail market share between modern and traditional trade channel. So I think the big modern on trade retailers have very small risk to default. As I mentioned, past 5 yrs avg impairment per year is rm0.2m, this should be the basis to assume receivable risk instead of annualizing impairment in 9m16

2) inventory should be at their risk but unlike steel or commodity inventory which has volatile pricing, DKSH's inventory is mainly FMCG, healthcare products & telco prepaid cards. The only risk is shelf life risk (no shelf life for prepaid card so this segment got no risk). Past 5 yrs of avg inventory write off is only about 1.8% of its inventory value. So I think the inventory value can be easily realized over a month (typical inventory turnover cycle) with less than 2% discount, if historical trend is a guide.

For PE multiples, you are right as the high teens to 20x pe multiples include the net working capital. So if you want to compare like to like btw distributors, u should net of the working capital and net debt, to see the intrinsic value for its distribution network. And I forecast rm60m core profit for 2016 (9m16 done rm47m).

I tried to compare DKSH biz to its retail customers such as AEON, Caring etc to see what's the valuation difference after net of working capital. The answer is quite straightforward, the retailers are trading at more than 20x PE with low single digit margin (3-6%) as compared to less than 5x PE for DKSH (1-2% net margin) Well, many investors are annoyed by its 1% net margin, but I see it as an opportunity for operating leverage (obviously 3q16 was operating deleverage as compared to 2q16) as I believe fundamentally, competition among distributors is less severe than retailers.

Hence, I believe profit growth will resume once consumer sentiment recover. After all, the exposure for DKSH is similar to Aeon/caring and other retailers, i.e. Consumer spending. But the operating leverage is steeper for DKSH and valuation is a lot cheaper as compared to other retailers. Of cos you can also argue the retailers have properties hence deserve a higher valuation. But I would prefer asset light investment for smilar market exposure and growth.

Another thing to share here, I realized DKSH Swiss is a net cash co with about RM1.5bn as at Jun16. I wonder if they will take DKSH Malaysia private giving such cheap valuation (<5x PE ex net working capital ex net debt) and cheap ringgit. Not meant to speculate but I do see value proposition for the holding company who owns 74%. Assume to offer rm7.00 per share, it only requires less than rm300m.

Price still dropping on small volume, I was shocked initially when price plunged from 6.15 to 4.80 within 2-3 weeks. But frankly, I feel happy now as the current price offers me to buy a quality co at distress valuation. Been review my investment thesis after seeing price weakness continue, but the more I study, the more comfortable I am.
13/12/2016 16:26
sumato88 Risk rider

You are right as the 1-2% net margin wouldn't change overnight and I don't expect it too. But I do expect 20 basis points margin improvement per yr based on my calculations, assuming 5-6% revenue growth. So 20 basis points to 1.00% net margin equals to 20% growth.

DKSH has net debt of rm345m 10 yrs ago vs rm19m net cash in 2015. So from now onwards, I would expect the co to pay more dividends. 9m16 was net debt of rm76m but I think this is atiming issue. Let's see 4q16, I would expect the cash return.
13/12/2016 16:31
cjcj sumato, your statements are so impressive! Bravo!
13/12/2016 16:56
Siew Jian Bin I just bought this share, but feel that bought in too early. :-)
17/12/2016 14:59
paoblocrk Dear Sumato88, stay firm with your belief, if the coming DKSH results is consistent with your belief, then you should continue to buy more or stay on track with it. Otherwise, if it is not consistent, then you may have to do some adjustment. One piece of advice, inexperience investor will nomrally only loose money because they sway away from their own belief, there... the transaction cost kicks in to eat up all their returns/margins. Time will tell if it is really a great stock
24/01/2017 11:15
sumato88 DKSH Swiss reported good results yesterday and share price shot up 8%. A prelude to good 4Q16 results for DKSH Malaysia? http://www.dksh.com/global-en/home/investors/financial-results-and-presentations
07/02/2017 12:36
cjcj sumato, mind to elaborate more on your finding from this annual report? Would like to listen your opinion. Thanks!
07/02/2017 12:57
cjcj http://78449.choruscall.com/dataconf/productusers/dksh/mediaframe/17964/indexr.html

Fill in the info and listen the webcast for the analysts.

As mentioned very strong Year in Malaysia!
07/02/2017 13:50
sumato88 I think numbers should be good for DKSH Malaysia. But scanty disclosure make it hard to know the numbers for sure. We can take a cue from its attribution to non-controlling interest which implies stronger 2H16 (1H16: CHF2.0m vs FY16: CHF4.4m). But bear in mind there are other subsi which DKSH Swiss not owning 100%, although Malaysia Minority Interest should share the most, based on the historical trend.
07/02/2017 14:33
cjcj Means Q4 2016 is better than Q3 2016 because Q3 has the weakest quarterly result in 2016 right?
07/02/2017 15:10
yangstockwatch DKSH has been sideway since fall from RM6...
After reading the latest news letter from the CEO,
"Compared to last year, net sales increased by 4.5%, operating profit (EBIT) by 8.4% and profit after tax by 6.7%. The number of specialists reached more than 30,000 for the first time."

or the similar link:
by Sumato88

Im expecting this counter will goes back to RM5 first shortly, then RM6 after QR released.

My average buying RM4.55..
Lets ride with me....
07/02/2017 15:46
paoblocrk at the Annual report of DKSH, it is noted that
" In November, DKSH sold BiO-LiFE, a company that develops and markets health products and nutritional supplements under its own brand in Malaysia."

Net sales in CHF for malaysia has reduced from 1,391.9m to 1,267.0m mainly due to the termination of 2 main contract

But the EBITDA on consumer goods ( which primary is Malaysia and Singaporeand HK) increased from 29.7mil to 105.8mil.

Somemore it is best result in company history.

Sounds positive but I hope they manage to collect back that bad debt wei......... then can further improve the profitability.

Higher dividend somemore, DKSH malaysia follow suit?

What do u think Sumato88?
09/02/2017 10:55
paoblocrk opps we have to take out gain on disposal of shareholding of CHF9.6m from the result... my bad, but EBIT still great.
09/02/2017 10:58
Bigbull99 I forsee strong earnings report coming next week. Hopefully earnings to recover subsequently to ensure it hits RM7 by year end.
17/02/2017 11:54
dudu Nobody buy this share?
Nobody...nobody but you !
Nobody...nobody but you !
17/02/2017 11:58
gnail go to rm 6 please
18/02/2017 10:29


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