Broadway Industrial (BWAY SP): Highest profit in 5 years

  • BUY Entry – 0.205 Target – 0.240 Stop Loss – 0.190

  • Listed on the mainboard of SGX since 1994, the company is one of the leaders in the manufacture of precision components and assemblies. 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.  

    hdd arm 300

  • Highest profit in 5 years. FY2021 net profit rose 8% YoY to S$15mn as revenue increased 18% YoY to S$471mn. Core net profit would have been higher at S$18mn if not for a S$2.4mn charge for impairment of goodwill.

    The company has proposed a final dividend of 0.5 Sing cents and a special dividend of 0.5 Sing cents, which, together with the interim dividend of 0.5 Sing cents, brings the total dividend for FY2021 to 1.5 Sing cents. 

  • Outlook and diversification. BWAY remains cautiously optimistic on the HDD business as it expects near-term demand to remain strong. Trendfocus, in a 2 Feb 2022 report, projected a 11.4% CAGR in total HDD revenue for the period 2021 to 2026.

    In terms of diversification, BWAY acquired a 55% stake in China-based Beijing Ant Brothers Technology in 2022 to establish a Robotics Business unit. The group has commenced marketing activities for its robots in Singapore ,Thailand and the Philippines and expects revenue contribution. 

  • Attractive valuations. BWAY currently trades at only 5.2x core FY2021 P/E (excluding non-recurring losses), or 6.7x FY2021 P/E (headline EPS) a significant discount to SG-listed technology manufacturing peers. 

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