Wegmans Holdings Bhd (WEGMANS, 0197) is a wood-based (mainly rubberwood) home furniture manufacturer, targeted for the medium-income level customers. Its products are sold both directly to customers and also through agents.

WEGMANS was founded in 1994 in Muar , Johor . At the initial stage, it specialized in selling kitchen furniture (dining room furniture) and below is the fraction revenue of Wegmans.

Revenue source :

➝ 93.13% from dining room furniture

➝ 4.17%   from living room furniture

➝ 1.67%   from bedroom furniture

➝1.03%    others

1) WEGMANS’s INFLUENTIAL AND VALUABLE CUSTOMER

99.03% of its revenue is derived from exports to over 70 countries around the world. Of which, there are 14 countries with consistent export orders, namely: Australia, Canada, Denmark, Estonia, France, Germany, Japan, Korea, Norway, Singapore, Spain, Sweden, United Kingdom (UK) and United States of America (USA).

Its major and valuable customers are:

1. Nitori Co Ltd, Japan (17.73% revenue contribution)
2. Super A-Mart Pty Ltd, Australia (10.22% revenue contribution)
3. Home Retail Group (Hong Kong) Ltd, United Kingdom (5.64% revenue contribution)

The revenue contribution from export countries are as below:

Despite of the current covid 19 outbreak, Wegmans’s management reassure that the company will remain profitable as per below screenshot that derived from the latest quarter report performance:

2) BENEFICIARY FROM THE TRADE WAR

A recent extensive report on the trade war by Nomura Global Markets Research identified furniture as one of the goods that the US is looking for import substitution (away from China imports).Nomura also pointed out that Malaysia is the fourth largest beneficiary of the trade diversion arising from the trade war.

At Wegman’s AGM on May 21, Wegman’s Managing Director Keh Wee Kiet had said that the export market remains a key growth driver, especially the US, from where there was an influx of orders. “The on-going US-China trade war has in fact provided us a lot of business opportunities as we received higher enquiries and sales leads from US customers who are looking to shift their orders to Southeast Asia,” Keh had said.

3) CONTINUOS DIVIDEND PAYOUT

Wegmans balance sheet remains healthy with net gearing of 0.1x. Although there is no formal dividend policy, they have been paying dividend for the past 3 years translating to 1.5% yield. Net margins circa 13% remains above average compared to peers and earnings are expected to remain robust with expansion plans coming onstream in FY20 onwards coupled as an OBM would set it apart from its competitors. You may refer the illustration as below :

TECHNICAL VIEW

Based on  the technical’s view, Wegmans once again make a strong breakout at .205

This breakout accompanied by higher volume which shows the greater buying interest to push the price higher. We expect it will test the next resistance at .225 with an immediate support at .205

CONCLUSION

Considering all the above, I opine that current price for WEGMANS is attractive due to below:

1) WEGMANS’s INFLUENTIAL AND VALUABLE CUSTOMER

2) BENEFICIARY FROM THE TRADE WAR

3) CONTINUOS DIVIDEND PAYOUT

LET’S SEE HOW THE SHARE PRICE MOVEMENT IN THE NEAR FUTURE FORBEARING ANY GOOD CORPORATE NEWS.

Disclaimer : The above opinion is never intended to be a BUY CALL whatsoever. I am sharing my observations ONLY based on fundamental; past history; current trading pattern; charts etc. Please make your own informed decision before buying this share or whatever share for that matter.

BURSAMASTER