Thursday, March 12, 2015

Ocncash ... Talks To Be Auto Parts Distri In Thailand

Despite seeing a CAGR of 53% in its net profit over the past three years, it is still hungry for expansion.

It is involved in felt and non woven parts manufacturer. It is OEM of resonated felt and non woven fabrics for motor vehicles and hygiene applications.

Felt is a textile used mainly for heat and sound insulation inside vehicles and air conditioners. Its customers convert it into a jacket of sorts and wrap it around the compressor so the noise is reduced. The purpose is similar for felt installed in cars.

It is riding in the sectors its products are used in - automobile and property markets. This provides the company with high consistent margins and growing sales.

Its products are used in automobiles, as noise dampeners in compressors of air conditioners and as insulation for buildings, including in roofs, partitions, walls and flooring. It is trying to penetrate the China market.

Between 2008 and 2013, it saw consistent sales growth. In 2013, it posted 148% rise in net profit to rm6.5 million despite smaller 17% increase in revenue to rm68.6 million. Over the years the company has been able to maintain double digit operating margins with its net margin in 2013 approaching the 10% mark.

It might not have to wait long if its talks with an automotive parts distributor in Thailand go well. A partnership could be formed by 2HFY2015. The Thai venture’s contribution to revenue would be minimum in the initial years. Its products to its customers are their raw materials.

The company’s ability to maintain healthy is promising, backed by strong demand growth in the automobile and property markets in its existing markets. Expansion into new markets, such as China will underpin its future growth.

It has a strong balance sheet with a low 3.72% gearing.

It is ready to strengthen its presence in Indonesia with the addition of a production line there in 2015.

Last year (Nov 2014) it is in talks with an Australian company that will become the sole supplier for Ford’s assembly in Bangkok.

The new ventures will require Oceancash to spend an additional rm10 million in FY2015. With a cash balance of rm12.87 million as at June 2014, its borrowings for its capex for 2015 will amount to rm4 million at most which will only bump up its net gearing to 0.02 times. It had total borrowings of rm14.18 million as at June 30 2014.

The company exports to Thailand, Taiwan, Indonesia and the Phillipines.

If its talks with the Australian company are successful, it will move one of its production lines in Malaysia to Thailand.

The felt has better margins than its non woven segment. Non woven products are used in diapers, sanitary napkins, wet wipes and surgical masks and gowns.

At rm0.33 it is trading at a 12 month trailing PER of 14.98 times and 1.27 times book.

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