Koon Yew Yin's Blog
Dominant is underrated - Koon Yew Yin
Koon Yew Yin
Publish date: Fri, 12 Mar 2021, 11:18 AM
Koon Yew Yin
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An official blog in i3investor to publish sharing by Mr. Koon Yew Yin.
All materials published here are prepared by Mr. Koon Yew Yin
All materials published here are prepared by Mr. Koon Yew Yin
I read this comprehensive article on Dominant from i3investor.com. If you do not want to read this long article, you can read my conclusion at the end of this piece. I am obliged to tell you that Dominant is one of my investment stock holdings.
Company background
Dominant Enterprise Berhad which commenced operation in 1992, is involved in the manufacturing of environmentally friendly engineered wood mouldings, laminated wood panel products as well as the distribution and export of a wide range of wood products to over 20 countries around the world. Dominant distributes wood panel and building material products to furniture manufacturers, interior designers, and construction-related players in Malaysia, Singapore, Australia, Thailand and Vietnam. The manufacturing segment manufacture laminated wood panel products, wrapped medium density fibreboard mouldings and furniture components for furniture manufacturers and interior design industries.
Investment thesis
Competitive strength and good track record.
A leading wood-based exporter in Asia. The Group currently has subsidiary presence in Malaysia, Singapore, Australia, Thailand and Vietnam. The Group aims to strengthen its footprint in all these countries through increased production capability, introduction of new products to the markets and developing new industries in each of these countries. With the Group’s excellent track record in exceptional product quality and timely delivery, we are optimistic that we will be able to capture a larger piece of the pie.
The Company has also earned a good reputation as a reliable and quality supplier when it supplied wood panels and other building materials to some prestigious and major building projects in Singapore, such as the Republic Plaza, Changi Airport Airfreight Terminal 5 and extensions of the DBS Bank building. Today, one of the subsidiaries of Dominan ranks as one of the major wood panel importers in Singapore.
Improving margin on up-cycle
Historically, Dominan has hit record profit in 2018 when average selling price (ASP) of the plywood hit the previous peak of 240 USD. However, the latest ASP has reached the all-time high of 280 USD. This can be seen from the spike in margin to 4.9% in the latest earning quarter as compared to ~2% pre-covid. The management of Dominan has attributed this improvement to better margin as well as effective costs management.
Work-from-home boom is a bust for big office furniture makers
Major corporations such as Google, Microsoft and Facebook have adopted work-from-home (WFH) policies to help contain the spread of the virus. Some have even gone to the extent of providing employees with one-off cash allowances to purchase home office furniture. Also, the cash handouts as part of the stimulus from the US government are reported to have spurred consumer spending on items such as home furnishing. This bodes well for furniture companies operating out of Muar, Johor, deemed the “heartland” of the local industry. Public Invest Research expects the growth in demand for Malaysian furniture to resume once the global economy recovers and returns to normal in 2021, with potential earnings growth of 37% and 20% in FY21 and FY22 respectively. Although some of the furniture maker has reported margin compression as a result of weaker USD and rising material costs, Dominan as supplier of the raw material for the furniture industry is the beneficiary from this trend.
Expansion plan
The construction of the Group’s Dengkil factory and Ipoh warehouse was expected to be completed by Dec 2020. This plant will increase their production capability, allowing Dominan to cater more effectively to market demand.
In 2019, the Group has also entered into an agreement to purchase 3 parcels of land in Muar totalling 18.4 acres, for RM12.8 million. The land parcels are expected to be delivered in December 2021.
Steadily growing plywood market
Amid the COVID-19 crisis and the looming economic recession, the plywood market worldwide will grow by a CAGR of 7.9% from 2019 to 2027 based on the report by Businesswire (range of projection: 2.3% by Market Watch to 25.5% by Simplywall.St)
Financials
FY21-FY22 could be see a potential recovery in earnings for Dominan from the impact of Covid-19, however bottom line would be slightly dragged by potential higher cost. Moving forward, I am bullish on FY21’s growth on the back of improving margin and dirt-cheap valuation.
Good earnings record
Dominan has always been profitable with steadily growing revenue and net profit with 5-year CAGR of 8.8% and 2.5% respectively from 2014 to 2019. This could be the result of the group’s competitive strength backed by an experienced management team as not many players in the same industry were able to display similar result during the stated period due to margin compression. For the 12-month period ended 31 December 2020, the drop in earnings was due mainly to the imposition of Movement Control Order (“MCO”) by the Malaysian Government, to tackle the COVID-19 pandemic. The latest earning quarter has delivered the highest net profit since 1Q19 which has reflected the rising margin due to higher ASP.
Conclusion:
Based on the following facts:
1 Its price chart is up trend which is most important.
2 Due to Covid 19 pandemic, more people have to work at home in most countries around the world. As a result, more wooden furniture is required.
3 Company expansion to increase production. Just completed Dengkil factory and Ipoh ware house.
3 Rising profit margin due to higher ASP.
It is safe to assume its annual EPS is 4 times its latest quarter ending Dec EPS 5.44 sen = 21.8 sen. Based on PE 10, its share price should be Rm 2.18 per share.
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Discussions
Be the first to like this. Showing 41 of 41 comments
There was a fire outbreak at the Group’s factory and warehouse in Muar located at PTD 2805, Jalan Raja,
Kawasan Perindustrian Bukit Pasir, 84300 Muar, Johor, Malaysia on 23 January 2021. The actual losses incurred
from the fire incident are still being ascertained.
Uncle Con you dont CB let ppl die can ah?
2021-03-12 11:38
New modus operandi: small cap, decent eps and under RM2. Previous mistake, big cap like TG or Supermax too big to swallow.
2021-03-12 11:56
KYY as usual selling after publish articles about good company. Don't fall for trap!!
2021-03-12 14:27
datuk calvin will tell u many stocks with high NTA such as butaland more undervalue....hehe
2021-03-12 14:53
Pump and dump is KKY modus operandi....as he has accumulated much cheaper...soon KKY will recommend Eden...
2021-03-12 16:41
Supermx so cheap n company making huge money n expanding he said he sold all. Can u believe him ? eh!
2021-03-12 17:47
Factory in fire not a concern ke MR.KYY?
Why no mention? Almost all their inventory burned. Coming quarter is a loss for sure.
2021-03-12 17:59
The cunning fox trying to recover losses in glove..at,kps,dominan..how about EAH?
2021-03-12 21:05
On the 9th KYY posted KPS is underrated, on that day KPS limit up. Today KYY posted DOMINAN underrated, DOMINAN limit up... wah, golden mouth.
2021-03-12 22:02
Uncle Koon, so easy for you to make money.
Any stock you sapu and then recommend will LU the next Day....
Huat ahhhhh.
2021-03-12 22:20
He has the financial resources to push up the price whenever he promotes a company.
No judgment but be aware of his past controversial actions, or may be so called unethical actions
2021-03-12 23:41
On 28/2/2021 I said the following in Dominant’s forum:
Profit margin & ROE are much lower if compared to Pohuat & Lii Hen.
Lii Hen total trade receivables is 0.74 month of latest QR sales
Pohuat total trade receivables is 0.94 month of latest QR sales
While Dominant total trade receivables is 2.52 months of latest QR sales
Pohuat total liabilities is 141mil, 33% of total equity
Liihen total liabilities is 177mil, 42% of total equity
While Dominant total liabilities is 239.9mil, 77% of total equity
Pohuat & Liihen PE is about 8.8 times, may be that’s the main reasons why market valued lower on Dominant
Another key factor is Pohuat & Liihen seem commanded much higher profit margin for their products than Dominant
ROE of Dominant also only half of the 2, historically
2021-03-13 01:54
KYY the infamous CON ARTIST IS BACK TO BUSINESS. first AT ,then KPS and DOMINANT . my sincere advice DUMP IN THE MONDAY MORNING AS SOON AS POSSIBLE AND DO NOT BUY ANY MORE
2021-03-13 09:35
kyy, the mkt expert, got hands with a golden touch. Every thing he touches, turns into GOLD !
2021-03-13 12:48
Thanks kyy, your kps let's me earn few hundred dollars. Will buy this stock on Monday. Hope another show. Kamsahamida
2021-03-13 13:00
Beware of coming quarter result:
1. Potential loss provision on fire incidence happened in Jan 21
2. Two weeks factory closed down due to covid cases among staff in Feb 21
Good luck guys!
2021-03-14 13:42
Lu pakai otak mah...!!
Insas is not only tech, it is a very deep margin of safety stock loh!
Remember INSAS IS BOTH TECH GROWTH STOCK & VERY STRONG MARGIN OF SAFETY STOCK MAH....!!
INSAS HAS THE BENEFIT OF BOTH WORLD LOH!
THUS INSAS VERY SAFE MAH...!!
JUST PAKAI OTAK THINK LAH...!!
Yes inari is a growth company in technology sector something like gloves company in health sector loh...!!
Insas is a wealth creation company holding rm 2 billion worth of inari share compare to insas mkt cap of only rm 603m mah...!!
Do u notice of INSAS huge margin of safety or not leh ??
So if u invest in insas, u have both huge margin of safety of insas & huge earnings growth thru inari mah...!!
Remember if u hold 1000 shares of insas is equivalent u hold 840 shares of inari mah!
Lu tau boh ??
When come to recovery play insas will be the best mah...!!
Its Nta is rm 2.83 per share loh!
Its intrinsic value when inclusive of inari mark to market gain exceed rm 5.00 per share mah...!!
Insas has a net cash exceeding Rm 0.90 per share woh!
When comes to earnings based on half year result insas profits is already rm 148m or eps 22.2 sen loh!
It is anticipated insas can hit eps of 40 sen per share giving pe of 2.1x mah!!
Thus insas is a stock which have both strong earnings of eps of 40 sen & back up with strong intrinsic share value of exceeding Rm 5.00 per share compare with the huge discounted share price of rm 0.875 per share loh!
Thus INSAS IS A SCREAMING BUY loh which u should not missed mah!
if u invest in insas u will be very confident & sleep soundly bcos u have both margin of safety, growth, dividend yield and positive cashflow mah...!!
JUST jump in b4 too late loh!
2021-03-14 13:43
Guys ask urself, what's KYY intentions. Sell on news obviously. Identify the wolf!
If he already analyze Dominant good buy why write this article AFTER LU. He would have wrote it before it surged.
HA.
2021-03-14 15:13
THAT FACTORY KENA DY STILL CAN UP?
PRODUCTION KENA 99 JOR
STILL PROMOTE?
WAH SEH
DAI LOU
U LIKE THAT WILL ASK MORE GO HOLLAND LERH
AT LEAST DO GOOD FOR AWHILE LARH
PEOPLE STILL REMEMBER ALL YOUR HOLLAND LORH
2021-03-14 20:02
as usual the infamous KYY wants to dump the overrated stock to the greenhorns.LOL.
2021-03-15 10:15
ORNA is underrated
9.04 sen EPS in 4Q20 means FY21 easily can make 9.04 * 4 = 36.16 sen EPS round up to 36.16 sen EPS. This is not aggressive because PAPER PULP price still increasing trend.
6 x PE on FY21 EPS of 36.16 sen = 6 * 36.16 = RM 2.17
2021-04-18 15:56
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Eastern686
真是一头不知廉耻的老猪。
2021-03-12 11:32