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Jom & Terry

Author: jomnterry   |   Latest post: Tue, 15 Dec 2020, 4:15 PM

 

WONG (7050) - TRADED AT DISCOUNT DUE TO LOW PROFILE?

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http://t.me/jomnterry

 

#jntstudynotes

 


 

WONG

 

TRADED AT DISCOUNT DUE TO LOW PROFILE?

(CLOSEST PEER: UWC)

 

Some Background Story:

Are we the first one to notice WONG? No, we’re not.

If you look at the technical chart, WONG’s share price has moved up from its low of RM0.40 per share to RM0.885 per share today in just 2 months.

Yes, we missed that.

In fact, we have just noticed WONG yesterday.

While WONG has moved up strongly today, we think that dismissing WONG stock simply because it has gone up a lot, is unwise.

Serious fundamental investors look for stocks based on fundamental analysis, instead of feeling whether a share price is ‘too high’ or ‘too low’.

Once we noticed WONG, we decided to study and analyse it.

Below are the study notes we have compiled for WONG. Through our study notes, we hope you can understand WONG a little more.

 

DISCLAIMER

Our study notes below are for sharing purpose only. Our views could be inaccurate. There is no BUY/SELL recommendation.
 


 

WONG & UWC ARE CLOSEST PEERS

WONG manufactures and sells high precision metal stamped parts and sheets for Industry 4.0, 5G, semiconductor customers and more.

Is there any other company in Malaysia that manufactures and sells precision metal parts and sheets too?

Yes – UWC. UWC is WONG’s closest peers (Valuation perspective below).

Note: WONG is also involved in construction. However, it only makes up 19% of WONG’s total revenue in 2020.

 

WONG IS OPTIMISTIC ABOUT FUTURE DEMAND, FOR YEARS TO COME

Driven by 5G, cloud computing, smart devices and Industry 4.0, demand for WONG’s E&E products is expected to grow strongly.

Moving forward, we can expect that WONG will focus on their manufacture prospects more and more.

WONG is optimistic about their manufacture prospects for years to come.

Source: WONG Annual & Quarterly Reports

 

PEER COMPARISON: TRADED AT DISCOUNT?

Based on FY2019 annual report, WONG generates a revenue of RM46 million from the sale of precision metal stamped parts and sheets metals. On the other hand, UWC generates a revenue of RM144 million from the same segment.

In the latest quarter, WONG and UWC generated a quarterly profit of RM2.2 million and RM18.6 million respectively. Annualising these figures would give WONG and UWC and annualise net profit of RM8.8 million and RM74.4 million respectively.

WONG and UWC has a market capitalisation of RM 100 million and RM 3,125 million respectively. Dividing the market capitalisation with forward 1-year earnings, we would get the following insights:

  • At a share price of RM 0.885WONG is being traded at a forward 1-year PER of 11.4 times.
  • On the other hand, at a share price of RM 5.63, UWC is being traded at a forward 1-year PER of 42.0 times.

See table below:

In this case, is WONG undervalued? Yes, we think so.

However, no one can be sure how much WONG’s share price can reach, as the valuation is giving by the collective market participants, not us.

 

SO, HOW MUCH THE MARKET MAY VALUE WONG?

 

  • We don't think WONG can demand a PER as high as UWC's. That said, for a company exposed to 5G, Industry 4.0 and semiconductor, a PER of 15 times should be reasonable. 
     
  • At a forward 1-year PER of 15 times, WONG’s shares is worth RM1.20. ​​To be conservative, we think WONG stands a chance to reach between RM1.00 and RM1.20. RM1.00 will be a psychological resistance. Does it have a chance to stand above RM1.00, then? Let us let Mr. Market decide.
     
  • At a forward 1-year PER of 20 times, WONG’s shares is worth RM1.60. This share price could be achieved under bullish scenarios. As a conservative investor, we merely treat this is a bonus. 
     
  • At a forward 1-year PER of 42 times, which is current UWC’s valuation, WONG’s share is worth RM3.30. This seems overly optimistic, but we could be wrong.

 

OTHER INFORMATION ABOUT WONG

  1. Net cash position. cash and cash equivalent of RM28 million as of 31 July 2020.
  1. Higher margins incoming. WONG is expanding into higher value-added manufacturing activities – higher margins.
  1. Under covered. WONG has been low profile and not on analysts’ radar or appears in press release related to technology stocks.
  1. Dividend payer. WONG is a small cap technology company who actually distributes dividends.
  1. Intensive shares buy back throughout 2020. This may hint that WONG has been undervalued.
  1. Recognisable and US MNC clients. Clients are in healthcare equipment, semiconductor industry etc.
  1. Business risks include inability to secure new orders and operational inefficiencies.

 

http://t.me/jomnterry

 

#jntstudynotes

 

DISCLAIMER

Our study notes are for sharing purpose only. Our views could be inaccurate. There is no BUY/SELL recommendation.
 

 

http://t.me/jomnterry

 

#jntstudynotes

 


 

WONG

 

TRADED AT DISCOUNT DUE TO LOW PROFILE?

(CLOSEST PEER: UWC)

 

Some Background Story:

Are we the first one to notice WONG? No, we’re not.

If you look at the technical chart, WONG’s share price has moved up from its low of RM0.40 per share to RM0.885 per share today in just 2 months.

Yes, we missed that.

In fact, we have just noticed WONG yesterday.

While WONG has moved up strongly today, we think that dismissing WONG stock simply because it has gone up a lot, is unwise.

Serious fundamental investors look for stocks based on fundamental analysis, instead of feeling whether a share price is ‘too high’ or ‘too low’.

Once we noticed WONG, we decided to study and analyse it.

Below are the study notes we have compiled for WONG. Through our study notes, we hope you can understand WONG a little more.

 

DISCLAIMER

Our study notes below are for sharing purpose only. Our views could be inaccurate. There is no BUY/SELL recommendation.
 


 

 

WONG & UWC ARE PEERS

WONG manufactures and sells high precision metal stamped parts and sheets for Industry 4.0, 5G, semiconductor customers and more.

Is there any other company in Malaysia that manufactures and sells precision metal parts and sheets too?

Yes – UWC. UWC is WONG’s closest peers (Valuation perspective below).

Note: WONG is also involved in construction. However, it only makes up 19% of WONG’s total revenue in 2020.

 

OPTIMISTIC ABOUT FUTURE DEMAND, FOR YEARS TO COME

Driven by 5G, cloud computing, smart devices and Industry 4.0, demand for WONG’s E&E products is expected to grow strongly.

Moving forward, we can expect that WONG will focus on their manufacture prospects more and more.

WONG is optimistic about their manufacture prospects for years to come.

Source: WONG Annual & Quarterly Reports

 

PEER COMPARISON: TRADED AT DISCOUNT?

Based on FY2019 annual report, WONG generates a revenue of RM46 million from the sale of precision metal stamped parts and sheets metals. On the other hand, UWC generates a revenue of RM144 million from the same segment.

In the latest quarter, WONG and UWC generated a quarterly profit of RM2.2 million and RM18.6 million respectively. Annualising these figures would give WONG and UWC and annualise net profit of RM8.8 million and RM74.4 million respectively.

WONG and UWC has a market capitalisation of RM 100 million and RM 3,125 million respectively. Dividing the market capitalisation with forward 1-year earnings, we would get the following insights:

  • At a share price of RM 0.885WONG is being traded at a forward 1-year PER of 11.4 times.
  • On the other hand, at a share price of RM 5.63, UWC is being traded at a forward 1-year PER of 42.0 times.

See table below:

In this case, is WONG undervalued? Yes, we think so.

However, no one can be sure how much WONG’s share price can reach, as the valuation is giving by the collective market participants, not us.

 

SO, HOW MUCH THE MARKET MAY VALUE WONG?

 

  • We don't think WONG can demand a PER as high as UWC's. That said, for a company exposed to 5G, Industry 4.0 and semiconductor, a PER of 15 times should be reasonable. 
     
  • At a forward 1-year PER of 15 times, WONG’s shares is worth RM1.20. ​​To be conservative, we think WONG stands a chance to reach between RM1.00 and RM1.20. RM1.00 will be a psychological resistance. Does it have a chance to stand above RM1.00, then? Let us let Mr. Market decide.
     
  • At a forward 1-year PER of 20 times, WONG’s shares is worth RM1.60. This share price could be achieved under bullish scenarios. As a conservative investor, we merely treat this is a bonus. 
     
  • At a forward 1-year PER of 42 times, which is current UWC’s valuation, WONG’s share is worth RM3.30. This seems overly optimistic, but we could be wrong.

 

OTHER INFORMATION ABOUT WONG

  1. Net cash position. cash and cash equivalent of RM28 million as of 31 July 2020.
  1. Higher margins incoming. WONG is expanding into higher value-added manufacturing activities – higher margins.
  1. Under covered. WONG has been low profile and not on analysts’ radar or appears in press release related to technology stocks.
  1. Dividend payer. WONG is a small cap technology company who actually distributes dividends.
  1. Intensive shares buy back throughout 2020. This may hint that WONG has been undervalued.
  1. Recognisable and US MNC clients. Clients are in healthcare equipment, semiconductor industry etc.
  1. Business risks include inability to secure new orders and operational inefficiencies.

 

http://t.me/jomnterry

#jntstudynotes

 

DISCLAIMER

Our study notes are for sharing purpose only. Our views could be inaccurate. There is no BUY/SELL recommendation.
 

 

 

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