THE INVESTMENT APPROACH OF CALVIN TAN

DUFU: ITS WORST TIMES NOW OVER: CYCLICAL UPTREND AHEAD POWERING UP BY NEW Ai THRUST & MUSHROOMING DATA CENTRES, Calvin Tan

calvintaneng
Publish date: Sat, 18 May 2024, 07:29 AM
calvintaneng
0 1,821
Hi Guys,

I have An Investment Approach I which I would like to all.

Dear friends of i3 Forum


In Peter Lynch's 6 Category of Stocks CYCLICALS FIT DUFU PERFECTLY


DUFU Has Gone Through A Cyclical Downturn And After Scraping the Bottom it will now Rise Back in its Cyclical Boom Times like the Turn of A Ferris Wheel


See


12,761 Singapore Flyer Images, Stock Photos, 3D objects ...

The Singapore Flyer (Ferris Wheel)


And on a clear day from the Top you can see both Johor & Indonesia


See what Dufu said about the time when it was at the bottom


Prospects (refer Bursa)

In 2023, the market cycle for Hard Disk Drives reached its lowest point. As we advance

through the second quarter of 2024, our Group is navigating the tail end of an unprecedented

downturn in the storage market









That was then!

Bad times never last if People Still Pursue Knowledge!


So see now what they "SEE AHEAD"


However, within our key operational domains - precision

machining of Hard Disk Drives and production of Sheet Metal and Stamping equipment and

components - we are witnessing a modest increase in demand.

We believe that global semiconductor sales are picking up and, coupled with a resurgence in

the memory sector, suggesting the potential onset of a new growth cycle, especially among

local manufacturers who typically lag behind global semiconductor players. This positive

momentum is supported by the conclusion of inventory adjustments and heightened demand in

electronics and AI-related applications.



See this Chart




See chart above carefully


HDD Sales dipped from year 2021 down to 2023

Now see 2024 there is a gradual upturn


AND BEYOND 2025 TO 2029 HDD sales Will Go Up Like A Rising Ferris Wheel!


SO BETTER GET ON BOARD EARLY AND ENJOY THE RIDE UP


Warm Regards


Calvin Tan


Please buy or sell after doing your own due diligence

Or consult your Remisier/Fund Manager




DUFU IS EMERGING FROM ITS DARKEST NIGHT TO A COMING BRIGHT NEW DAWN AHEAD




Reposting Past Good Articles on Dufu below by others



From VALUE INVEST ASIA



The Master of Hard Disk: Dufu Technology Corp. Berhad

Dufu Technology Corp. Berhad (Dufu) (KLSE:DUFU) specialises in the manufacturing of precision machining parts and components for the Hard Disk Drive (HDD), industrial safety and sensor, telecommunications, computer and consumer electronics industries. 

Since its listing in 2007, the stock has been a multi-bagger for its investors, its share price has grown over 1,100% in value. In this article, we will take a closer look at Dufu’s business profile, management, and financials, to assess whether the company is suitable for an investment now. 

Business overview

Dufu group is made up of seven entities. The listed entity is principally involved in investment holding while the principal activities of its six subsidiaries are as follows: 

(Source: 2019 annual report)

The group manufactures the following products:

(Source: IPO prospectus)

More than 75% of Dufu’s revenue comes from the HDD segment where the group has established long term business relationships with its major customers such as Seagate Technology International (Singapore), Seagate Technology (Thailand) Ltd, Western Digital (M) Sdn Bhd, Western Digital (Thailand) Ltd and MMI Holdings Ltd. In fact, two of its major customers (unnamed) contributed 61.53% and 67.44% of the group’s revenue in 2018 and 2019 respectively. 

(Source: 2019 annual report)

Dufu derives most of its revenue from abroad, 95% of which is denominated in US dollars (USD) while the bulk of the group’s expenses are paid in the respective local currencies where it operates. Therefore, the gradual strengthening of USD versus the Ringgit is a favourable trend and should give the group a lift in its operating margins. 

(Source: 2019 annual report)

Industry players and market position

HDD manufacturers source HDD components from a handful of suppliers only. They are stringent in their selection of component and parts suppliers as quality, reliability and delivery time are crucial in this competitive market. The production volume allocation for the component or part is determined on a quarterly basis. Quality and cost are two primary determinants for an increase in production allocation for a given quarter from its existing qualified suppliers.

The closest competitors to Dufu for the supply of HDD disk spaces and clamps to Seagate and Western Digital are seen as:

To the best of knowledge of its directors, the group estimates that it is one of the top suppliers of HDD disk spacers and has a 20-30% market share globally. 

Future prospects and strategies

Dufu’s prospects are very much tied to the HDD industry. International Data Corporation (IDC), in its Data Age 2025 report, predicts that worldwide data creation will grow to an enormous 163 zettabytes (ZB) by 2025, which is 10x the amount of data produced in 2017, where hard drives will be central in managing 70% of the data-sphere. 

Internet of Things (IoT), real-time data, cognitive artificial intelligence (AI) systems, increased security data requirements, and big data analytics are among the key trends that should result in strong demand for high capacity HDDs. Therefore, Dufu, which manufacturers HDD-related components, is set to ride on this increasing demand. 

Despite the positive projections in HDD, Dufu acknowledges that it faces significant business and customer concentration risks. The group intends to diversify its product portfolio and penetrate into the automotive segment following its International Automotive Task Force (IATF) 16949:2016 certification on 15 April 2019. While discussions are in progress for its automotive products, this segment is still at a very nascent stage to contribute positively to the group’s top-line growth.  

Major shareholders and leaders

Dufu’s largest shareholder is Mr. Lee Hui-Ta (also known as Li Hui Ta) with a direct and indirect equity stake of 20.67%. Ms. Wang Kuei-Hua is Mr. Lee Hui-Ta’s spouse. Mr. Lee Hui-Ta is the Executive Chairman and Co-founder of the group and has more than 28 years of experience in precision tooling and precision machining. 

(Source: 2019 annual report)

Key senior management personnel include Mr. Wu Mao-Yuan who serves as Executive Director since 2015. Mr. Wu is also the Managing Director of Guangzhou Futron Technology Co. Ltd, a subsidiary of the group. He owns an equity stake of 3.42% in Dufu. 

Separately, Mr. Yeoh Beng Hooi is the Chief Executive Officer (CEO) since 2015, after serving as Chief Operating Officer (COO) since 2004. He has a 0.02% equity stake in the group.

(Source: 2019 annual report)

Financials  

Measure 1: Growth in revenue and profits

Dufu has achieved growth in revenue and profits at compounded annual growth rates (CAGR) of 12.87% and 47.84% from 2014 to 2019. These are commendable growth rates. 

Measure 2: Profitability

Dufu’s net profit margins have tripled from 6.3% in 2014 to 20.7% in 2019. Meanwhile, the group’s return on equity ratios has improved substantially over the same period from 4.6% in 2014 to 17.9% in 2019. 

Measure 3: Liquidity

Dufu’s current and cash ratios are at healthy levels. The group also does not have gearing issues as it is in a net cash position. As at 31 December 2019, Dufu has cash and cash equivalents of RM43.5 million versus total borrowings of RM17.5 million.

Round 4: Dividends payout

Dufu has rewarded shareholders with increasing dividend per share in line with increasing profits. In recent years 2017 – 2019, the dividend payout ratio has been above 40% of profits. 

Conclusion

With a closing share price of RM7.19 as at 21 July 2020, Dufu is trading at a price to earnings (PE) ratio of 34, with a market capitalisation of RM1.9 billion. 

Dufu’s operations were affected in Q1-Q2 2020 as its plants in China and Malaysia were temporarily shut down due to the preventive measures towards the Covid-19 pandemic. Both plants have subsequently recovered back to full workforce but the group remains cautious of potential supply chain disruption risks since the scale and length of the pandemic remains unresolved. 

Over the long term, Dufu’s growth is underpinned by higher demand for storage solutions given the huge growth in data consumption as well as technological advancements in increasing the number of components within an HDD platform. Investors with knowledge and expertise in this area could find Dufu of interest.   

(Source: Google Finance)

Market Segment
Product
HDD components
Spacer
Clamp and spring washer
Circular latch
Swage pin
Ground pin
Extreme coil pin
Hexagon nut
Industrial safety and sensor components
Heat and gas sensor housing
Infra-red sensor housing
Sensor terminal pins
Sensor cap
Lead frame
Telecommunication components
Battery connector
Balance weight
Computer peripheral components
Contact solder
Consumer electronics components
Mounting bar
Reflection plate
Back cab
Chassis
Heat sink
Bracket
Others
Terminal (Automotive)
Shunt resistor (Automotive)
2019

RM

2018

RM

Customer I 
122,621,649
114,207,846
Customer II 
45,393,505
34,323,740
168,015,154
148,531,586
Group revenue
249,122,579
241,451,305
% of group revenue
67.44%
61.53%
2019

RM

2018

RM

Malaysia
18,187,477
22,967,833
China
41,050,764
39,498,571
Singapore
19,022,641
19,470,894
Thailand
142,599,974
127,535,840
Other countries
28,261,723
31,978,167
Total
249,122,579
241,451,305
  • Disk Precision Industries Pte Ltd (DP), Singapore and Global Primax, China (for Seagate); and
  • DP and Notion VTec Berhad (KLSE:NOTION) (for Western Digital).

Dufu has rewarded shareholders with increasing dividend per share in line with increasing profits. In recent years 2017 – 2019, the dividend payout ratio has been above 40% of profits. 

Conclusion

With a closing share price of RM7.19 as at 21 July 2020, Dufu is trading at a price to earnings (PE) ratio of 34, with a market capitalisation of RM1.9 billion. 

Dufu’s operations were affected in Q1-Q2 2020 as its plants in China and Malaysia were temporarily shut down due to the preventive measures towards the Covid-19 pandemic. Both plants have subsequently recovered back to full workforce but the group remains cautious of potential supply chain disruption risks since the scale and length of the pandemic remains unresolved. 

Over the long term, Dufu’s growth is underpinned by higher demand for storage solutions given the huge growth in data consumption as well as technological advancements in increasing the number of components within an HDD platform. Investors with knowledge and expertise in this area could find Dufu of interest.   


DUFU PEAKED ABOVE RM7.00 IN GOOD TIMES


WILL DUFU GO BACK THERE?


ONLY TIME WILL TELL








Discussions
Be the first to like this. Showing 18 of 18 comments

calvintaneng

Peter Lynch: What is a Cyclical Stock and How to Invest in them? | Stock Shop 1998【C:P.L Ep.41】

https://www.youtube.com/watch?v=hCSD5zbNxeQ

4 weeks ago

calvintaneng

DUFU, JCY & NOTION all 3 Have Cash Positive Balance Sheets

All 3 Survived the Downturn with healthy balance sheet intact

Now they will face Good Times again with the Rise of AI (Artificial Intelligence) & DATA CENTERS (DC)

4 weeks ago

wang336604

is this real

4 weeks ago

EngineeringProfit

Calvin, finally after you got their funds stuck there for so long, you are guiding them the make real profits in klse superbull run (But jcy, notion and dufu have gone up so much....Can't you ask them not to chase high but to wait for double bottom?)

4 weeks ago

sharkdododo

Dufu gogogogo.. h9e

4 weeks ago

gohkimhock

Calvin, no mention on Dufu's receivables since you like to harp on this issue? Btw, the current PE is very high. You seem to have a problem in stock picking...

4 weeks ago

calvintaneng

Eagle Group members who bought bplant at 57 sen, Jtiasa at 63 sen, Taann at Rm2.75, Thplant at 47 sen, Fgv at Rm1.16 and even Tsh at Rm1.09 are all doing fine. Many received best ever dividends

4 weeks ago

flairline

Better hope in vstec 😆

4 weeks ago

calvintaneng

For Dufu its main dealings with Western Digital and Seagate and these are doing very well

As for high p/e Dufu is classified under "TURNAROUNDS"

PETER LYNCH SAID

A CYCLICAL AT PEAK HAS LOW P/E

AND THAT IS THE TIME TO SELL

WHILE AT ITS BOTTOM IT HAS HIGH P/E

BUYING IS DUE TO CYCLICAL UPTURN YET AHEAD WHEN PROFIT ACCELERATE AND P/E WILL THEN SHRINK

IN ANY CASE DUFU IS A HIGH BETA STOCK

IN BOOM IT SHOOTS HIGHER

IN BAD TIMES IT DROPS MORE

IN BOTH IT WILL GO INTO EXTREMES DUE TO IT BEING A BETA STOCK

4 weeks ago

calvintaneng

Vstec buy call was on 29 May 2020 at Rm1.17 (after split 58.5 sen)

Now over Rm3.60 and up 600% so don't chase

4 weeks ago

sharkdododo

Let's fo continue hoot Dufu let it fly above 3 bucks!

4 weeks ago

calvintaneng

NOTION UP FIRST

THEN JCY

FINALLY WILL BE DUFU

NOTION VTEC: 4 ENGINES OF GROWTH FIRING UP IN UNISON: HDD (Hard Disk Drive), DIGITAL CAMERA, EMS, PPE N95 FACE MASKS, Calvin Tan

https://klse.i3investor.com/web/blog/detail/www.eaglevisioninvest.com/2024-05-20-story-h-161551412-NOTION_VTEC_4_ENGINES_OF_GROWTH_FIRING_UP_IN_UNISON_HDD_Hard_Disk_Drive

3 weeks ago

calvintaneng

Outlook:
Demand for large capacity HDDs mainly for cloud and enterprise computing and increasingly for Artificial Intelligence (AI) machine learning
data storage has seen a resurgence of demand and orders as we serve that space diligently. We have established long-term relationships with
these major HDD makers and the commitment for long-term supply is of paramount importance. We will grow in line with the industry growth
pattern

from Notion Qtr

3 weeks ago

calvintaneng

Blog: JCY (5161) FANTASTIC TURNAROUND RESULTS CONFIRMED WHAT DUFU & NOTION REPORTED! HDD BULL RUN COMMENCING IN EARNEST, Calvin Tan

https://klse.i3investor.com/web/blog/detail/www.eaglevisioninvest.com/2024-05-23-story-h-161463089-JCY_5161_FANTASTIC_TURNAROUND_RESULTS_CONFIRMED_WHAT_DUFU_NOTION_REPORT

3 weeks ago

calvintaneng

Inside a Google Data Center

See

https://www.youtube.com/watch?v=XZmGGAbHqa0

See carefuly

At the Very "Center" of Data Center are HARD DISK DRIVES (HDD) Rows and Rows and Rows of HDD!!

3 weeks ago

calvintaneng

THE MAIN FUNCTION OF WORKERS IN DC


MAKE SURE HDD (HARD DISK DRIVES) ARE IN TIP TOP CONDITION

3 weeks ago

calvintaneng

THERE ARE MORE THAN 10,000 DATA CENTERS IN THE WORLD & ONLY 3 HDD MANUFACTUERERS, Calvin Tan

https://klse.i3investor.com/web/blog/detail/www.eaglevisioninvest.com/2024-05-25-story-h-160749967-THERE_ARE_MORE_THAN_10_000_DATA_CENTERS_IN_THE_WORLD_ONLY_3_HDD_MANUFAC


calvintaneng

53,609 posts

Posted by calvintaneng > 3 minutes ago | Report Abuse

SEE MALAYSIA MENTIONED IN DATA CENTER NEWS

https://www.datacenterdynamics.com/en/news/

only Seagate, Western Digital & Toshiba supply HDD to all these thousands of DATA Centers Worldwide

JCY
NOTION
DUFU

WILL BENEFIT TREMENDOUSLY

FROM NOW TILL REST OF THE DECADE THE HOTTEST THEME IS AI AND DATA CENTERS

3 weeks ago

calvintaneng

AFTER GREAT SUCCESS IN VSTEC - JCY & NOTION ARE TWO CHUN CHUN BUY CALLS OF CALVIN TAN

https://klse.i3investor.com/web/blog/detail/www.eaglevisioninvest.com/2024-06-09-story-h-159761067-AFTER_GREAT_SUCCESS_IN_VSTEC_JCY_NOTION_ARE_TWO_CHUN_CHUN_BUY_CALLS_OF_

1 minute ago



calvintaneng

VSTEC (5162) A MONOPOLY ON THE INTERNET ECONOMY & E-COMMERCE PLUS HIGH DIVIDENDS , Calvin Tan Research

https://klse.i3investor.com/web/blog/detail/www.eaglevisioninvest.com/2020-05-29-story-h1507893343-VSTEC_5162_A_MONOPOLY_ON_THE_INTERNET_ECONOMY_E_COMMERCE_PLUS_HIGH_DIVI

VSTEC IS LOCAL WHY JCY, NOTION & DUFU ARE GLOBAL!!

1 week ago

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