Since the introduction of vaccine, it seems like the glove counters, or any personal protective equipment (“PPE”) counters had gone into the “loss decade”. However, one technology company was being tagged as a PPE related company by investors while majority of its revenue constitute of the Electronics and Electrical (“E&E”) sector.
The company was also found to be serving semiconductor manufacturers, memory drive manufacturers as well as the automotive parts sector. Compared to any other themed stock in the market, if this information were to be spread to the community, tomorrow might be another limit up day for this company.
Oh, I forgot to mention. This company is D’nonce Technology Berhad (“DNONCE”).
DNONCE is a hybrid play of the highly profitable but flat sentiment healthcare segment as well as the highly valued technology companies. The company does play a part in the value chain of glove production but again – majority of its revenue comes from the E&E sector.
Under its E&E sector, DNONCE provides cleanroom services with standards of Class 100, Class 1k & Class 10k. An interestingly high PE company – UWC Berhad (“UWC”) had just announced in their latest quarterly report that they completed a Class 10k cleanroom. As a comparison, DNONCE has already got them in place.
The cleanroom segment of the company was mainly involved in precision tray & component washing lines for ultrasonic cleaning, rinsing & drying purposes. It was also noteworthy that DNONCE is involved in the Electronic Manufacturing Services (“EMS”) sector as well.
DNONCE provides box-build assembly services for components that require critically clean and pollution free. A great example would be for the memory drive sector. The company also manufactures Printed Circuit Board (“PCB”) which is also facing shortage amidst the global exploding demand for semiconductor products.
The specialty for DNONCE would be their ability to create high precisionPCB trays for smart devices. This is in line with the global take-up rate of 5G.
You might have one question in mind – why is there no one that talks about this company?
Simple. If weren’t for our sharing, most investors do not know about the E&E sector for this company and blindly undervalued this company as a pure PPE player. Do note that in the previous quarter, the management mentioned that one of their key indirect customer delayed product launch and would be continued in 3QFY21. Guess what? 3QFY21 is exactly the next quarter!
Supported by its earnings potential in the healthcare segment and high growth potential E&E segment, I do not see how this company is trading at a trailing PE of 22 times. Majority of the players in town are trading at 60 – 80 times trailing PE. So why can’t DNONCE deserve a double up in valuation?
I do not have the answer for this. However! I believe DNONCE is amongst the most undervalued technology counter in Bursa Malaysia. Please do not miss out this undervalued gem in your portfolio construction!