• Asia File Corporation Berhad (ASIAFLE) started off since 1980s and is now evolved into a leading file manufacturer with Europe being its core market, followed by Malaysia, leveraging on its manufacturing facilities in Malaysia and Europe as well as a series of reputable brand names and patented products.

• Its consumer ware division has grown from RM0.3m to RM48.6m in less than 5 years is eyeing for new products launch and overseas expansion.

• We initiate coverage on ASIAFLE with a HOLD call and fair value of RM1.86, based on 10.0x P/E pegged to its forward FY23f EPS of 18.6 sen.

Investment Highlights

• Leading file manufacturer. Over the years, ASIAFLE has built a strong foothold in the filing industry, leveraging on its (i) file manufacturing facilities and paper mill across Malaysia, UK, and Germany, which allows it to optimise resources across various plants and create high-quality products at lower costs, (ii) reputable brand “ABBA” and (iii) a series of high-quality patented products. As a market leader, ASIAFLE was able to secure its margin given little competition in the filing industry.

• Expansion plan in consumer ware division. The consumer ware division is armed with a pipeline of new product ranges to be launched, backed by ASIAFLE’s expertise in product R&D and pricing strategy. Emulating the successful business model of its filing business, the group intends to expand the sales of the products overseas especially in the UK and Europe after the vigorous product testing locally since FY18. The expansion plan will leverage on its physical presence, good distribution network and ready manufacturing facilities in UK and Europe.

• Capacity for additional output. Without major capital expenditure, ASIAFLE has the capacity to cater for 2x-3x of its existing filing business and additional 50.0% turnover for its consumer ware division. Given the ample capacity capabilities, the group is well-positioned to take on more sales from both industry consolidation and recovering demand in a post-pandemic world.

Source: Mplus Research - 21 Sept 2022