WE are re-featuring Oceancash (Fundamental: 1.4/3, Valuation: 0.8/3), a company which, apart from its strong fundamentals, stands to benefit as an exporter, with sales denominated in USD. The stock, which was first recommended by InsiderAsia back in October 2014, when it traded at 29.5 sen, reached a high of 42.5 sen, before tracing the broader market weakness to 36 sen last Friday. 

The ringgit has on trending lower against the greenback over the last year, and in particular in the past two-three months. This is positive for Oceancash as a net US dollar earner. The company exports about 80% of its products, which is denominated in dollar, while most of its cost (60%) is denominated in ringgit. 

We have already seen the positive impact of the weaker ringgit reflected in its IH2015’s results, where unrealized gains jumped 7 times y-y to RM 749,000 while net margins expanded from 9.7% to 11% over the same period.

To recap, the company’s underlying fundamentals are pretty good. Sales have been rising consistently while underlying earnings have also grown over the past four years. EBITDA margins have held steady in the double digits, ranging between 14-18%. 

Prospects for Oceancash are promising for the second half of the year, as the company expects Indonesia’s replenishment in its automobile inventory level to positively contribute to its thermoplastic felts division. Its other division, which produces non-woven products used in baby diapers and sanitary cloth products, also expects increased demand from Thailand and Japan.

Whilst the barriers to entry to manufacture these products are low, Oceancash has significant competitive advantage in having established long relationships with its major customers.  

Relative to its growth prospects, the stock still trades at decent valuations, with a trailing 12-month P/E of 12.48 times and a price-to-book ratio of 1.19 times. Dividend yield stands at a decent 1.79%. 

This article first appeared in digitaledge Daily, on September 21, 2015.

Insider Asia’s Stock Of The Day: OCNCASH(21/09/2015)