SERSOL
DUAL COMBO - HAND SANITIZER & ACRYLIC COATINGS
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SERSOL’S SHARES WERE AGGRESSIVELY BOUGHT BACK BY THE EXECUTIVE CHAIRMAN
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SAFEGUARDING PUBLIC HEALTH VIA OWN-BRAND, W.H.O-COMPLIANT HAND SANITIZER
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QUALIFIED TO SERVE BOTH LOCAL AND INTERNATIONAL CUSTOMERS
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THE DEMAND OF ACRYLIC SHEETS HAS EXPLODED. SERSOL SELLS THEIR OWN-BRAND ACRYLIC COATINGS
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ACRYLIC COATINGS SHOULD HAVE UNPRECEDENTED DEMAND, YET UNNOTICED BY THE MARKET
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A WILD GUESS: ACRYLIC COATINGS WOULD EXPERIENCE UNPRECEDENTED DEMAND
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IMPROVING PROFIT MARGINS, SOURCING COMPETITIVE RAW MATERIALS, ESTABLISHING STRONG BARGAINING POWER, ETC
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ZERO-DEBT AND NET CASH, FINANCIALLY READY TO LEVEL UP THEIR GAME
- SHARE PRICES OF MOST COMPANIES SELLING SANITISER HAVE BROKEN NEW HIGHS
SERSOL’S SHARES WERE AGGRESSIVELY BOUGHT BACK BY THE EXECUTIVE CHAIRMAN - WHAT'S COMING UP?
SERSOL manufactures and distributes high-quality plastic coatings, metal coatings, wood coatings and decorative coatings to their established clientele made up of local and multinational companies.
Nonetheless, due to the COVID-19 outbreak, the sluggish global economy has impacted consumer spending on property, furniture and electronic gadgets. As a result, this has impacted the demand of plastic coating, metal coatings, wooding coatings and decorative coatings. They have had several loss-making quarters. Coupled with the bearish stock market in March 2020, Sersol’s share price plummeted from January 2020’s 15 sen to March 2020’s 5 sen.
Interestingly, exactly in March 2020, Sersol’s Executive Chairman, Toh Hong Chye, has been aggressively buying more than 3 million units of Sersol shares in total. What's coming up?
SAFEGUARDING PUBLIC HEALTH VIA OWN-BRAND, W.H.O-COMPLIANT HAND SANITIZER
Sersol stated they focus on developing innovative products, like the anti-bacteria coatings, disinfectants and which they expect to have increasing demand in the New Normal.
As of 10 August 2020, Sersol’s own-brand sanitiZer has been available on the market. Sersol’s management achieves what they stated – a sign of reliability.
The manufacture of coatings requires competency in research and development (R&D), mastery of chemistry as well as accurate formulations. Hence, it is actually not a surprise when we notice Sersol started manufacturing and selling their own brand hand sanitiser in 2020 to safeguard public hygiene and health from COVID-19.
Formulated based on W.H.O’s guidelines, Sersol’s hand sanitiser has been successfully registered under the National Pharmaceutical Regulatory Agency. The product has also obtained approval from relevant authorities and started distribution since 11 May 2020.
Source: https://klse.i3investor.com/blogs/Bursa_Master/2020-05-27-story-h1507864606-WOW_THIS_CO_HAS_STARTED_SELLING_THEIR_OWN_BRAND_SANITIZERS_IN_JOHOR_ARE.jsp
QUALIFIED TO SERVE BOTH LOCAL AND INTERNATIONAL CUSTOMERS
Sersol continues to serve its multinational company customers, distributors and agencies with on time delivery upon ordering. Having multinational companies as their customers, Sersol seems qualified to market their own-brand, W.H.O-compliant hand sanitisers locally and internationally.
Based on Sersol’s latest quarterly reported, their latest revenue skyrocketted by 115.1% to RM7.17 million due to the successful securement and placement of orders from a new major customer. We do not know what orders this new major customer place, but what’s more important is that Sersol’s revenue saw a 115.1% skyrocket.
Source: Sersol 2020 Q1 Quarterly Report
THE DEMAND OF ACRYLIC SHEETS HAS EXPLODED. SERSOL SELLS THEIR OWN-BRAND ACRYLIC COATINGS
Acrylic sheets are widely used across various industries, ranging from food to transport, building, and medical industries and now, as social distancing measures.
Acrylic is favoured over glass given its durability, clarity and lightweight properties. Glass is 50% heavier than acrylic and has a clarity of only 82%, as compared to acrylic’s clarity of 92%. Apart from the clarity and lightweight properties of acrylic which make it a compelling substitute for glass, acrylic can be easily moulded into any shapes to fit any measurements.
Asia Poly, the only listed Malaysian manufacturer of cast acrylic sheets, is now riding on strong growth opportunities presented by the US-China trade war and the Covid-19 pandemic. Due to the additional 25% tariff for acrylic products exported from China, customers from the US are shifting their purchases of acrylic sheets from Malaysia instead.
Asia Poly is currently running at a maximum capacity of 800 tonnes per month through two production lines out of its facility in Klang. Asia Poly has locked in orders up to next February. Going forward, Asia Poly expects further improvements in gross profit margins, on the back of an increase in average selling prices.
Beyond Covid-19, Asia Poly is eyeing another segment with growth potential export markets – the automotive industry. The adoption of acrylic in automotive is growing as manufacturers aim to make cars as lightweight as possible. For one, the rear windscreen and windows of a car can be fitted with acrylic instead of glass.
Source: Cast Acrylic Sheet Market, September 2019
(Before the market experiences the demand boom due to COVID-19 and social distancing measures)
Based on market research, there are only about 20 notable acrylic sheet manufacturers around the world, and Asia Poly is one of them.
Source: Cast Acrylic Sheet Market, September 2019
Sersol manufactures and sells their own-brand acrylic coatings.
Here is our wild guess: If Sersol collaborates with Asia Poly in coating their acrylic sheets to fulfill their requirements of their aggressively expanding customer base, Sersol’s acrylic coating products would experience an unprecedent demand.
Considering that there are only about 20 notable acrylic sheet manufacturers around the world, and Asia Poly is one of them, our guess may not be that wild after all.
SERSOL STRIVES TO MAKE THINGS WORK
Sersol is taking proactive steps improve the profit margins of all their products by looking into sourcing more competitive raw materials in order to develop products at a cheaper cost while maintaining its quality and performance to attract new customers from abroad and local market. The increase in supply volume will bring advantages of economy of scale in production cost and bargaining power in raw materials purchase.
In addition, Sersol is enhancing their Research and Development ability in products development, problems solving and troubleshooting, cost-effective in selection of raw materials and formulate the coatings according to the required specification and application of customers in niche and consumer coatings market.
Sersol continues to serve its multi-national company customers, distributors and agencies with on time delivery upon ordering, attentive customer service on products testing and enquiries, and also aiming to be competitive in cost control.
Sersol will continue to monitor and tighten its credit control policy on its customers and operation expenses in year 2020.
FINANCIALLY READY TO LEVEL UP THEIR GAME
To seize the sizable, market opportunities of hand sanitiser and acrylic coatings demand, having a decent financial position means a lot. At a current ratio of 3.90 times, Sersol has no problem meeting its short-term financial obligations. This enables Sersol to focus on seizing the opportunities.
More importantly, at zero-debt and net-cash positions, Sersol is able to ramp up or scale its manufacturing activities without incurring debts.
SERSOL’S BUSINESS RISKS
Sersol’s hand sanitiser and acrylic coating products may not generate as much revenue and earnings as expected. Sersol’s financial performance could be dragged by the prolonged weak demand of plastic coating, metal coatings, wooding coatings and decorative coatings.
SHARE PRICE
The market is giving Sersol a share price of 19.5 sen equivalent market capitalisation of RM40 million. The share prices of most companies selling sanitiser have broken new high. Sersol's previous high was RM1.00. At current share price of 19.5 sen, Sersol is not only selling hand sanitiser, but also acrylic coatings. The share price of Asia Poly, Malaysia's acrylic players, has skyrocketed by a staggering 8 times within 2 months.
DISCLAIMER
The article is for sharing purpose only. There is no buy/sell recommendation.
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