"Scenic in Name, Beauty in Frame"
is the trademark quote of Classic Scenic Berhad, a local unnoticed
leader in the making of wooden picture frame mouldings. After reading
its annual reports and financial numbers, I came to realize that this
company could be a potential gem in Bursa. Hence, I made up my mind to
visit the company's plant located in Rawang.
Kim,
the Financial Controller of Classic Scenic, greeted me upon my arrival
at the office. Simon, the executive director joined us in the
discussion. I must admit that this is one of the best investor relations
experience I've ever had as Kim answered all my questions with
patience. I am indebted to Kim for the thorough explanations on how this
industry works and the full business model of the company.
Let's see what I've learned from this site visit.
#1, 6 Major Products
Classic
Scenic's wide range of product offerings can be segmented into 6 main
groups - wood stained, matt colour, decorative gilding, gloss lacquer,
laminated veneer and wash & distressed.
#2, Market Share
The
company has achieved 37% of Malaysia's total exports for finished
moulding as at 31 December 2015 being the highest market share in
Malaysia. The remaining 63% is shared among 10 other players. The
management's statistics show that Classic Scenic has approximately 5.5%
of global exported market share for finished moulding.
#3, Country concentration
It exports about 77% to USA, 3% to Canada, 9% to Australia, 5% to Europe and 5% to Asia.
#4, Top 3 Customers
Michael
Stores, Inc. is the largest retailer of arts & crafts materials in
the United States, with 1,313 stores spanning across the North America.
Hobby Lobby, Inc. with about 700 stores in the USA. Most importantly,
Larson Juhl, a Berkshire Hathaway's company, is also one of the big customer of Classic Scenic.
#5, Incentivized Cost Savings
Every
year, the company sets a target for cost savings and if the employees
could outperform the target, the extra cost savings will be distributed
as a form of rewards based on individual's performance appraisal.
Brilliant!
#6, Moving upstream
The
company has plans to venture into saw milling to save costs. Since the
current sawn timbers are purchased from their suppliers, the off-cut
parts have already factored into the price of each sawn timber.
Conclusion
Classic Scenic Berhad operates in a niche market. The management has placed a lot of attention in its product quality so as to achieve higher margins as compared to its peers. Besides, the company's low-cost awareness has protected its profit margin. I walked away feeling impressed with the company and its management.
CSCENIC (7202) - 6 Things I Learned From Classic Scenic's Visit
http://www.valueinvestingstock.com/#!6-Things-I-Learned-From-Classic-Scenics-Visit/cour/576b81f00cf258cfddd86a70
