Chee Wah Corporation bhd (-ve)

Chee Wah Corporation (Fundamental: 0.35/3, Valuation: 0.9/3) first triggered our momentum algorithm yesterday, closing down 7.3% at 51 sen. The rarely traded stock saw a surge in investor interest over the last three days, with an average of 39,133 shares changing hands, compared to an average of only 3,358 shares traded over the past 200 days. 

Established in 1959 as a trading company, Chee Wah has grown into a fully integrated manufacturer and distributor of stationery. Its products, sold under established brands of ‘CAMPAP’ and ‘FOREST’, include spiral note books and note pads, files, hard cover books and gift wraps. 

Penang-based Chee Wah exports to over 50 countries, offering products under Original Brand Manufacturing, Original Equipment Manufacturing and Original Design Manufacturing agreements. Notably, export, which contributed an increasing proportion of sales since FYJune2010, overtook domestic sales in FY2013. For FY2014, export accounted for 62.5% of sales, up from 57.6% the previous year. 

However, the company has been loss-making from FY2010-FY2013. It returned to the black in FY2014 with a small net profit of RM135,235, due mainly to higher export sales and a successful rationalisation and streamlining exercise which started in FY2011. The exercise saw the disposal of two subsidiaries, which were involved in the manufacturing and trading of paper bags and related packaging products. The company also shut down its five loss-making retail outlets.

For 9MFY2015, revenue grew 4.2% to RM64.1 million, thanks to higher export sales. Net profit was RM702,000, a reversal from net loss of RM518,000 for 9MFY2014. 

Last month, Chee Wah completed the acquisition of a piece of leasehold land, together with two single-storey buildings, in Butterworth, Penang for RM6.5 million. The company plans to use the property as warehouses, replacing its currently-rented warehouse.

This article first appeared in digitaledge Daily, on August 13, 2015.