This article first appeared in The Edge Malaysia Weekly on August 5, 2024 - August 11, 2024

Founded in 1989, Penang-based Chin Well Holdings Bhd (KL: CHINWEL) is one of the world’s largest manufacturers and suppliers of carbon steel fasteners, which include screws, nuts and bolts.

The Taiwanese-owned firm, which made a net profit of RM2.4 million in the financial year ended June 30, 2020 (FY2020), saw its net profit jump to RM23.4 million in FY2021, which then climbed to RM96 million in FY2022 before retreating to RM39.5 million in FY2023.

The gains recorded over the past three years translate to an adjusted compound annual growth rate (CAGR) of 92.2%, which helped Chin Well bag the award for Highest Growth in Profit After Tax (PAT) Over Three Years under the industrial products and services category at The Edge Malaysia Centurion Club Corporate Awards 2024.

With production facilities in Penang and Vietnam’s Dong Nai Province, Chin Well makes fasteners primarily used in highway guard rails, power transmission towers, furniture and various other applications. One of its subsidiaries is involved in the trading of fastener products.

Besides the domestic market, the group also sells its fasteners to the rest of Asia, Europe, North America and the Middle East.

Chin Well is also involved in the manufacturing of precision galvanised wire, gabions, fences and chicken mesh via its wire products division, with production facilities located in Penang.

Chin Well — listed on the Main Market of Bursa Malaysia since 1999 — is 57% controlled by Benua Handal Sdn Bhd, the private vehicle of a Taiwanese family, whose members include co-founding managing director Tsai Yung Chuan, his son Tsai Cheng Hsun, as well as his daughters Tsai Chia Ling and Tsai Chia Wen.

Cheng Hsun and Chia Ling also sit on the board as executive directors, while Chia Wen is the marketing manager of the Vietnam unit.

Quintet Luxembourg for Samarang Ucits–Samarang Asian Prosperity is the second largest shareholder of Chin Well, with close to a 10% stake.

Chin Well has had a dividend policy of distributing at least 40% of the group’s net profits to shareholders since FY2014, which it continued to adhere to in FY2023, when it made a payout of 5.51 sen per share.

During the three-year evaluation period for the Centurion awards, Chin Well delivered a return on equity (ROE) of 4.07% for FY2021, 15.41% for FY2022 and 5.9% for FY2023, which translates to a weighted ROE of 8.4%.

Meanwhile, Chin Well’s stock price gained from 99.3 sen (adjusted) on March 31, 2021, to RM1.441 on March 31, 2022, and RM1.559 on March 31, 2023, before dipping to RM1.21 on March 31, 2024, which translates to a CAGR of 5.45%.

In its Annual Report 2023, Chin Well says the market is expected to be more volatile and challenging, as evidenced by on-going geopolitical conflicts and rampant inflation worldwide, especially in the US and certain European countries — two of the group’s major destination markets.

Still, despite such global uncertainties, Chin Well expects to continue benefiting from anti-dumping duties imposed by the European Commission and the US on steels and fasteners originating from China, as well as the US government’s mega infrastructure projects as part of its efforts to boost the American economy.

In a research report dated June 18, Public-Invest Research reaffirms its cautious stance on Chin Well, as it expects the group’s near-term outlook to be challenged by weak demand recovery and elevated operating costs.

“The surge in freight rates as a result of disruptions in major trade lanes will hamper an already fragile demand recovery for the group. Nonetheless, Chin Well is well-placed to weather economic uncertainties, underpinned by its debt-free capital structure, a total cash level of RM116 million and management’s prudent budget control,” the research house adds.

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