InsiderAsia’s Stock Pick: Prolexus

by **Cals** Tue 04 Nov 2014, 01:22

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MANY of Malaysia’s garment manufacturers are thriving, in sharp contrast to popular perception that textiles are a sunset industry. They have diversified their labour intensive production facilities to lower cost countries, and have established good track records on quality and human labour conditions.
Indeed, in the wake of last year’s Rana Plaza disaster in Bangladesh, many principals have sought to source from more ethical and established manufacturers as opposed to cheap sweatshop operators. This structural trend, together with an appreciating US dollar, will benefit players like Prolexus, one of Malaysia’s largest garment manufacturers.
Established in 1976, Prolexus is engaged in apparel manufacturing and retailing, and outdoor advertising. It owns and operates three garment manufacturing plants in Malaysia and China. It has two in-house brands; Be Elementz and Bixiz Kids.
Prolexus also has a 51.91% stake in HiQ Media (Malaysia) Sdn Bhd, which operates Powerscreen, Malaysia’s leading outdoor LED screen advertising company. For FY July 2013, the garments segment accounted for 97.2% of sales and 98.7% of pre-tax profit.
The company exports most of its products. The US accounted for 71.0% of total sales in FY2013, followed by the EU (14.4%) and Malaysia (3.1%).
For FY2014, pre-tax profit surged 24.9% to RM24.2 million on the back of a similar rise in sales to RM294.1 million.
Balance sheet is solid. As at end-July 2014, net cash stood at RM23.4 million or 30 sen per share. Net profit margin was at a 5-year high of 7.1% in FY2014, up from 3.0% in FY2010 and 5.3% FY2012.
The stock is trading at a low trailing 12-month P/E ratio of 7.1 times and 1.4 times book. Dividends per share was 3 sen in FY2013, translating into a yield of 1.8%.
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This article first appeared in The Edge Financial Daily, on November 3, 2014.