Broadway Industrial (BWAY SP):
|The need for space
- BUY Entry – 0.215 Target – 0.240 Stop Loss – 0.205
It is a key provider of actuator arms, assemblies and other related parts for the global hard disk drive (HDD) industry.
Headquartered in Singapore, the company has 4 manufacturing facilities in China and Thailand and employs around 3,5000 people.
Listed on the mainboard of SGX since 1994, the company is one of the leaders in the manufacture of precision components and assemblies.
- Need for space. Total HDD sector revenue is expected to increase at a 10% CAGR from 2020 to 2025, reaching total sales of US$32.9bn by 2025, according to forecasts by TRENDFOCUS.
Growth will mainly be driven by enterprise demand for more storage.
While the growth of cloud-based solutions has been highlighted as a key driver of higher storage demand, the market may still be overlooking the increasing trend of data-localisation measures.
The number of localisation measures around the world has more than doubled over the last four years, with China being the most data-restrictive country, followed by Indonesia, Russia, and South America.
Strong outlook in 2H 2021. 1H2021 sales increased 11% YoY to S$211mn while net profit grew by 9% YoY to S$7mn.
The better performance was driven primarily by higher shipment volume and higher average selling price of its HDD products as it shipped more high-performance enterprise products.
Management commented that it expects demand for high-performance HDDs and personal storage HDDs to remain strong in 2H 2021.
The company currently trades at an attractive 6.5x annualised 1H2021 P/E.