Bull markets are born on pessimism, grow on scepticism, mature on optimism and die on euphoria.

Tuesday, May 26, 2015

Chin Well: Email enquiry to IR (25/5)

Just sent an email to Chin Well group's IR regarding some of the issues related to the group as below. 

1) There was an article from Bloomberg mentioned that EU had renew another five years tariffs on screws and bolts from China last month which will expire in Mar 2020. Are you able to confirm regarding this anti-dumping duty extension?
- Yes, the extension took effect on 28-March 2015 for a 5-year period.

2) If the anti dumping duty being extend, how well can Chin Well benefit from this? Does the management foresee better sales or normal as previously?
- Chin Well is one of the 9 Malaysian companies whose exports to EU are exempted from any duty. We do expect higher sales from EU as happened in 2009 when the earlier anti-dumping duty was imposed.
- However you must understand that currently, EU is seeing a mixed bag of fortunes in economy, where some countries are doing better than others. With this duty being extended, we hope that sales will pickup when the economies rebound.

3) With the recent quantitative easing being implement in Europe and the strengthening of RM against EUR, is that any drop in orders from Europe countries?
- EU demand is as above where some countries are faring better than others.
- We always give customers the option of whether to pay in USD or EUR. For EUR sales, we tell the customer that we add a certain percentage of currency hedge risk on top of sales. Our sales is 50-50 between USD and EUR.

4) With the recent drop in steel rod price, how long does Chin Well need to benefit from the lower raw material cost?
- Typically raw materials make up about 60-70% of our production cost. Our inventory turnover period is about 6 months.

5) Based on the sensitivity analysis for foreign currency risk described in AR2014, the group will face decreased PBT as a result of strengthening of RM against EUR and weakening of RM against USD. Is my interpretation correct? In this case, both currency movement is acting unfavourable to the group.
- As mentioned above, we impose a “forex risk fee” for EUR to safeguard our interest. Some of our imports are in USD so there is natural hedge.

6) There is an article mentioned that Chin Well group benefit from the GST implementation. Could you explain more on this?

- For one thing, the 6% GST is lower than the previous 10% sales service tax (SST), so prices of goods would be lower. Also, all players have to impose GST, whereas some players did not include SST. That’s why we welcome GST, because it levels the playing field in the whole industry!

No comments:

Post a Comment

What do you think about this post? Looking forward from your comments :)