Denko share price activity had been in a lackluster for the past several years, with not much participation seen from both institution and retail investor. However, the stage start to change as when substantial shareholder Middlemount International Limited had been seen paring down stakes from a total 11m shares held in 2014 to the current of 2.9m shares 2015.
While 2015 had prove to be a challenging year, how would Denko drive along with the stronger USD and the booming demand in the consumer electronic sector?
The price chart had shown that Denko had been seeing active volume in the recent days with 3 occasion in year 2015 where volume traded surpasses 25 million of shares exchange hand in the open market.
According to the chart reading, it had been highlighted that Denko had saw good accumulation from the open market at an average range of RM 0.35, where huge volume are supported by solid bullish candlestick. Denko had been trending along an average price of RM 0.35 and should be looking to break forward upon a saturated consolidation which will penetrate above RM 0.40.
Surpassing the psychological barrier of RM 0.40 will mark a strong uptrend in Denko, putting it's feet towards the uncharted territory.
Going Big on Contract Manufacturing
Consumer electronics will be seen as the main driver in year 2016. The coming up of emerging market in the South East Asia and South America region had opened up huge demand on consumer electronics item, such as smart phones devices. The growing younger generation which had the strongest spending power continue to be the main driver in contributing to the huge growing consumer electronic and electric sector. In order to capitalize this opportunity, Denko had recently expanded it's services to Indonesia after acquiring PT WinSheng Plastic and Tooling Industry. The expansion had been seen strategic to Denko as it can cater to the fast growing consumer electronic market in Indonesia, as well as a better proximity to their existing client in Indonesia.
With a relatively cheaper raw material from cheaper crude oil, and a stronger USD that can haul up good forex gain, this window of opportunity had been a huge turning point to several industries. Amongst them is competitor Geshen which had saw share price putting up steady gains, hitting almost RM 3.00 from a lowly RM 0.60, resembling a 500% capital gain, is 1 of the best example to note.
Similar competitor such as EG had not been left out in the pack as well, with share price gaining more than 100% from a lowly 40 cents.
Interrelated companies such as BCM Electronics Corporation Sdn Bhd, a wholly owned subsidiary of Comcorp, had also put huge influence into the whole performance of the group.
All these companies bear similar traits, such as beneficial of a stronger USD, involved in Contract Manufacturing (Plastic Moulding / PCB / Precision Engineering), Outstanding share of around 100m, and a market capitalization of below RM 100m before strong run up.
Currently, Denko is just sitting at a market capitalization of RM 39 million with 104.46m outstanding shares. Should you miss any of this spectacular run, you will have possibly 1 more chance in Denko.
Raising Fund and Cashing In
Denko is committed to expand it's operation in Indonesia following the incentive from the Indonesian government in luring more electronic and automotive related industry into the nation to boost the economy. Currently, Denko had cashed in their non core asset in Penang, which consist of a leasehold land and building for a sum of RM 7.65 million, recording a gain on disposal amounting RM 5.4 million.
According to known sources, Denko is also planning for a private placement exercise in 2016 in order to raise more fund for expansion in Indonesia. The private placement exercise will see a minimum pricing of RM 0.40, being the par value of the share. The recent disposal made by outgoing substantial shareholder, Middlemount Internation Limited, at a closed market dealing of RM 0.45 a share had raised speculation of a possible pricing of RM 0.45 a share or higher in the private placement. Sources informed that with the current demanding trend in the contract manufacturing involving plastic mould and electronic good, it is very easy to identify investor that would want to be exposed into this booming industry.
Charging into the Consumer's Battery ?
Denko
future expansion and diversification might be seeing the manufacturing
of batteries. 10 years ago, an ordinary consumer is likely to be using 1
mobile device, which is the mobile phone. However, the fast changing IT
and IT equipment had change the landscape of the consumer behavior.
Currently, it is very easy to identify an individual with a smart phone,
a tablet / pad, and a smart watch and a power bank. While all these
devices are great and interesting, it could not be of any use without
the power that comes from the battery.Consumer now had higher preferences in mobile devices that have 70% to 80% of the ability from a laptop/desktop computer. The high demand of battery powering consumer electronic is a big market that still have huge growing opportunity.
Inline
with the current operation of Denko, it is very easy for Denko to tap
into contract manufacturing for battery components / parts, or even the
whole battery.Emerging new smart phone brands such as OPPO and VIVO had opened up more opportunity in the playing field. While negotiation had been great, familiar sources are seeing Denko tying up with one of the emerging smart phone manufacturer.
Conclusion
Denko is a great company with full of growth and interesting development. At the current price, Denko will be a good mid/long term investment based on
- Denko going big in plastic moulding segment, and will see strong contribution from latest acquired company PT WinSheng Plastic and Tools.
- Benefit from Strong USD and lower raw material prices
- Private placement possible pricing of RM 0.45 (Minimum RM 0.40)
- Non Core Asset disposal of RM 7.65m to boost cash flow, capex and pare down debts
- Tapping into battery segment of the consumer electronics
- Strong trend in Contract Manufacturer in Plastic Mould / Electronic products
- 2016 revenue looking to surge above RM 100 million
Miss the previous? Don't miss with Denko
Bone's short term TP : RM 0.45
Mid/Long term : RM 0.60
Cheers and have a nice day
Regards,
Bone
DENKO (8176) - Denko Industrial (Denko, 8176) - The Force Awakens
http://bonescythe.blogspot.my/2015/12/denko-force-awakens.html
DENKO (8176)
