Daibochi - a long term & sustainable growth stock?

 

Year 2020 is almost over, despite the deadly Covid 19 impact at the beginning of the year, stock market indexes have recovered and some even surpassed level before the pandemic eg. DJIA, Nasdaq and our FBM KLCI too. Surprisingly HSI, STI and ASX are still below the Jan 2020 level. 

A stock in my portfolio that has shown good return this year is Daibochi ( I know, nothing compared to glove stocks). Let's have a quick look at its FY20 annual report and see whether it has a long term & sustainable growth potential:-

1. FY2020 Revenue (FY 2019 consists of 19 months), Earnings and Dividend per share are all showing good growth

2. Company's growth strategies:-

- allocating Rm100 million in FY20 & FY21 to expand capacity by 60%

- developing sustainable FPP to meet customers need 

- expand beyond just MNC into regional brand customers in Southeast Asia & Oceania

3. Strong management if we believe the Scientex DNA is embedded

I am positive with these growth strategies and hence holding on to it as I believe it is still at the beginning of a long and sustainable growth trajectory. At current price of 2.70, it does not look over or undervalue but if the 60% capacity expansion is delivering the growth expected, I hope its value will be double by then.

As some of you may already know, there is a substantial shareholder, Samarang Asian Prosperity Fund started offloading Daibochi since July 2020. Based on its last announcement on 19 Oct 2020, it has reduced it stake to less than 5% (about 16 million shares) but I believe it is still selling. This, I believe has somewhat suppressed the share price of Daibochi lately. 

As long as it continues to deliver growth and when Samarang has stopped or finished selling, the price should continue its uptrend to demonstrate the characteristic of growth stock. Please do your own assessment if you decide to invest in Daibochi as I have vested interest in it.