PETALING JAYA: CWG Holding Bhd’s earnings have bottomed out and are poised for a strong rebound in the financial year 2023-2024 (FY23-FY24).
This is possible with the easing in freight rates and a less competitive landscape following the Covid-19 industry washout that has resulted in increased export sales.
Hong Leong Industries Bhd (HLIB) Research is projecting CWG’s earnings to grow by 181%, 22% and 20% for FY23, FY24 and FY25, respectively, representing a compounded annual growth rate of 59%.
It values CWG at 45 sen a share and this is based on 13.5 times FY24 earnings per share of 3.4 sen, which is in line with its pre-pandemic’s (2017-2020) five-year historical price-to-earnings average.
Established in 1959, CWG is a leading stationery manufacturer with a strong focus on paper-based products such as exercise books, spiral notebooks and pads.
It is also an export-oriented company, with 65% of group sales derived from Asian, Oceanian, European, African and American regions.
HLIB Research believes CWG’s sales will grow alongside with the burgeoning global literacy rate.
This trend has been observed in China, whereby the leading stationery players’ sales are expanding alongside with the country’s growing literacy rate and population.
While the global adult literacy rate (people aged 15 and above) has steadily increased from 84.1% in 2010 to 86.8% in 2020, the research house noted that regions like the Arab world, South Asia and Sub-Saharan Africa (where CWG has a presence in) are growing faster than global pace.
Hence, this would present a significant growth potential for CWG in these markets.
It is noteworthy that CWG’s Asia sales (which include the Middle East markets) have increased steadily from RM36mil in 2015 to RM40mil in 2020 (ex-Covid-19 period).
Its export sales were heavily impacted by the steep rise in freight rates and supply chain disruptions, resulting in a significant decline of 36.7% in 2020.
CWG reported a net profit of RM1.55mil for its second quarter ended Dec 31, 2022, compared with a net loss of RM956,000 in the previous corresponding period.
Revenue during the quarter improved to RM23.99mil, compared with RM14.76mil a year earlier.
In its notes on its second quarter performance, CWG said the global economic uncertainties are expected to continue throughout FY23.
“The inflationary pressures remain a challenging issue that may influence consumers’ buying power and appetite.
“Nevertheless, the board is cautiously optimistic of this year’s performance and will continue to closely manage and control cost efficiencies in this uncertain and challenging environment.”