Techfast is involved in the manufacturing & sale of self-clinching fasteners (SCFs), that are used in the assembly of LCD and plasma screen TVs as well as PCs.
It commands an estimated 60% market share in Malaysia and exports to over 31 countries (under the trademark "TFM" which is registered in 22 countries). Exports make up 85% of revenue and 80% of profit. Techfast says its world market share for SCFs stands at around 0.4%.
Techfast's Malaysian operations in Shah Alam churn out more than 20 million SCF pieces a month, while its China set-up produces 10 million pieces a month.
Techfast has signed a shareholders agreement with 2 Thai partners to set up a manufacturing plant in Bangkok. It will hold a 55%-stake in the JV Company and production is expected to commence in November.
Since 2001, Techfast has had a strategic partnership with a well-established SCF player, the UK's Trifast plc, manufacturing SCFs for it on an OEM basis. At present, between 15% and 20% of all SCFs made by Techfast are supplied to Trifast.
Recent Development
Today, Techfast has announced that Trifast is acquiring a 25%-stake in Techfast from 4 of its major shareholders i.e. YS Yap (its chairman & MD), TO Lim (its ED), KL Fong (another ED) & CH Chin (a substantial shareholder). The 25%-stake, which represents 38 million shares, will be acquired at a cost of RM19 million cash or RM 0.50 each.
After their disposal, the 4 above shareholders’ collective stake will be reduced from 54.5% to 29.5%.
Recent Financial Results
Techfast’s net profit for QE30/6/06 increased 39.1% q-o-q or 27.3% y-o-y to RM1.46 mil. This was achieved on a turnover that has increased 12.9% q-o-q or 72.1% y-o-y to RM7.59 mil. See the table below.
Valuation
Based on its EPS of 0.96 sen for QE30/6/06, Techfast’s full-year EPS would be about 3.84 sen. At a closing price of RM0.555 yesterday, Techfast is trading at a PE of 14.45 times.
Technical Outlook
From the weekly chart below, we can see that Techfast is in an uptrend. The uptrend line support is at RM0.50. On weakness, it may drop back to the uptrend line & that would present a good entry to this stock.
Chart: Techfast's weekly chart as at Oct 16
Conclusion
Techfast is involved in a fast-growing business with very good prospect. Its major customer, Trifast sees the potential of the company & has decided to acquire a stake in the company. The key personnels remain unchanged & they still have substantial stake in the company. While the current price is not cheap, the future growth could see Techfast's net profit increasing significantly. As such, Techfast is a good long-term investment.
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