KL Trader Investment Research Articles

Author: kltrader   |   Latest post: Mon, 24 Jun 2019, 9:21 AM


Asia File Corporation Bhd - Rising Raw Material Costs

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Maintain HOLD

4QFY18 results were in line and we introduce our FY21 forecast. We expect flattish topline growth on an increasingly saturated stationery market but lower earnings on the expected uptrend in raw material prices. We think Asia File still lacks catalyst and hence, we maintain our HOLD rating for now with an unchanged TP of MYR3.13. This is based on FY19 PER of 11.6x (5-year average forward PER).

4QFY18 in line

4QFY18 net profit of MYR11.1m (-31% YoY, -41% QoQ) was negatively impacted by lower sales from both local and overseas markets. Notwithstanding, the underperformance earnings brought FY18 net profit to MYR59.1m (+5.8% YoY) which was within our expectations at 97% of our full-year estimate. FY18 EBITDA of MYR66.6m (-2.4% YoY) was also within our expectations at 97% of our full-year estimate.

Awaiting contribution from new business

To derive growth in the coming years, the Group is expected to start selling new disposable foodware products at end of CY2018. Nevertheless, we think the contribution may not be significant to its FY19 earnings at the early stage. We keep our earnings forecasts unchanged at this juncture with an expectation of lower FY19 earnings of MYR52.9m (-12% YoY) on higher raw material costs (Fig 2).

More towards dividend play

We find the lack of a catalyst for a re-rating in the near term. That said, investors could benefit from its generous dividend payout. The Group has proposed a final single tier DPS of 8sen which lifts full-year DPS to 15sen, representing a 49% DPR. This is slightly in-line with its 3-year historical DPR of 50%. The stock continues to offer >5% yield. Downside risk is also reduced now that the stock is trading below book value at 0.9x PBV.

Source: Maybank Research - 01 Jun 2018

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