DENKO (8176) - Denko Industrial Corporation Berhad - Towards Explosive Growth


DENKO (8176) - Denko Industrial Corporation Berhad - Towards Explosive Growth 

Denko Industrial Corporation Berhad (Denko - 8176) had made headline in 2015 when the group had decided to acquire PT Winsheng Plastic and Tooling Industry in Indonesia to expand it's manufacturing capacity in plastic mould injection. Prior to the acquiring of PT Winsheng Plastic and Tooling, the group had yet to record strong stream of revenue from the wholly owned subsidiary. However, related sources are looking forward to see Denko starting to recognize revenue from it's Indonesian arm in the 2H of 2016.


Supplier for Dyson's product

Aside from providing plastic injection mould services for electronic and electrical brand such as JVC Kenwood, Pioneer, Fujitsu, Olympus, Schneider Electric, one of it's core customer is Dyson. Dyson is well known for it's wind based solution electrical product from blade-less fan, air blade technology hand dryer, and with the latest being Dyson handy hair dryer.

The hair dryer that had a similar resemblance of the blade-less fan is the latest product from Dyson, where it is small, light but yet powerful if compared to it's own range of competitor.

Familiar sources are looking to see Denko seeing contribution of revenue from this product from Dyson, not withstanding future Dyson product in the pipeline which is currently under development.

Aside from Dyson, Denko also strives to benefit from other plastic mould injection products.

Technical



Based on the price chart of Denko, the share could had saturated after a 9 months consolidation. As the share had detected some fresh buying movement prior to the nearing of the next quarter release of financial result, Denko is looking in favor in trading towards 40 cents region in the coming days.

With the weaker ringgit for here to stay, Malaysia will become an ideal location for contract based manufacturing and plastic fabrication. In fact, competitor like EG had spent RM 30 million for a new plant in Sungai Petani to cater for more demand. As for Denko, the weaker ringgit is a bonus for as there was large increase in demand for Malaysian manufactured products. Through Denko principal operating subsidiary Winsheng Plastic and Tooling industry, it is an indirect exporter by supplying plastic parts to it's multinational customers who are the exporters.

Aside from making investment into complex machinery, the group also invested into human resources to provide a one stop solution for clients, from CAD designing until assembly.


At the current market capitalization of RM 38.6 million with 104.468 million shares, it is expected that once it's Indonesia unit start to achieve operation of scale, it will greatly contribute to the EPS of the group. At the current share base, it will be easy for Denko to achieve a stronger EPS for FYE 2017 when operating in full capacity, which can potentially see an EPS of 5 to 6 cents per annum.


Bone's TP : RM 0.45

DENKO (8176) - Denko Industrial Corporation Berhad - Towards Explosive Growth 
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