Friday 16 March 2012

Maxwell International Holdings Ltd

Maxwell reported sales totaling RM386 million in 2011, up 15% from the previous year on the back of both higher volume sales and average selling prices. Volume sales totalled 12.6 million shoe pairs, up 11.6% from the previous year. boosted by orders from two new trading house customers.

Recall that the majority of Maxwell's customers are trading houses and brand distributors, who in turn service a wide range of global brand names including Yonex, Diadora, Kappa, Hush Puppies, Brooks, FILA and most recently, Li Ning.

Net profit was up by a lower 7.2% to RM69.9 million in 2011. Margins were lower, primarily due to higher discounts on bulk volume orders. Nonetheless, net margin remains at a pretty solid 18.1%.

As an OEM (original equipment manufacturer) and ODM (original design manufacturer), Maxwell is more or less buffered against volatility in raw material prices. The company earns a manufacturing margin by pricing its products on a cost plus basis.

Its business model will benefit from the trend of out-sourcing manufacturing activities, which is expected to continue as brand owners turn their focus to research and development, sales, marketing and distribution.

In this respect, the outlook for Maxwell is less uncertain given the fickle and rapidly changing consumer preferences.

Maxwell has indicated it would maintain a 20% profit payout ratio, which would imply dividends totalling 3.5sen per share based on last year's profit. If so, share holders would earn an attractive net yield of 8.7% at the prevailing price of 40sen.

IPO price RM0.54
2011 EPS 8.3sen
Estimated DPS 3.5sen
Net asset/ share RM0.79
Net cash RM212.2 million

The Edge Financial Daily, 16 March 2012

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