Stock Review – PWF (7134) (PWF CORPORATION BERHAD)

Bursa Malaysia - 7134
Bloomberg - PW:MK

Yahoo - 7134 .kl
Webpage - http://www.pwconsolidated.com.my/

Sector : Consumer Products and Services

Sub Sector : Agriculture Products
Focus : Poultry

Company Profile:

PWF core business is integrated poultry farming. PWF had it headquarter in Penang. PWF involves in feed manufacturing with a maximum capacity of 26,000 metric tonnes per month. The feed manufacturing process is fully automated.

PWF main products are boiler, table eggs and process chicken. PWF able to produce over 5 million kgs of boiler per year, 3 million birds of day old chicken per month, and 700,000 eggs per day.

Revenue:

PWF only had one operating segment and only operated in Malaysia. Below is the revenue and operating margin of PWF.

5 Years Annualise Growth of Revenue	6.30 %
9 Years Annualise Growth of Revenue	3.94 %

In 2012, PWF operating margin had drop to the lowest over the past 10 years at 2.3 %. This is due to oversupply of broiler in the Malaysia market and increase of commodity price, soya and corn, the main ingredient for poultry feed.

Nett Profit

Bar Chart below shows PWF nett profit from 2010 – 2018.

5 Years Annualise Growth of Nett Profit	18.83 %
9 Years Annualise Growth of Nett Profit	20.58 %

From 2010 to 2012 PWF had done a corporate restructure and report discontinue of operation in the annual report which cause the significant low nett profit.

The discontinue operation are mainly from the acquisition of companies from 2004 to 2008 by PWF. Some of companies acquired by PWF over the year are Nayang Prosper Sdn Bhd, Liang Hwa Farm Sdn Bhd, Evergreen Breeding Farm Sdn Bhd, Din-Hin Farm Sdn Bhd, Lean  Hong Duckfeed Sdn Bhd.

In 28 March 2013 three subsidiaries had wind up:

1) Everay Agritect Sdn Bhd

2) PW Tyres & Auto Service formerly known as Gold Star Tyre Mart Sdn Bhd which is a subsidiaries of Liang Hwa Farms Sdn Bhd.

3) PW Breeder (Taiping) Sdn Bhd formerly known as Evergreen Breeding Farm Sdn Bhd.

Other subsidiary wind up over the year are:

1) In 2019 Pin Wee Food Processing Sdn Bhd

2) In 2019 Pin Wee Chicken Trading Sdn Bhd formerly know as PinWee Food Industries (KL) Sdn Bhd

3) In 2017 PW Nutri Processing Sdn Bhd formerly known as Di Hin Chicken Processing Farms Sdn Bhd

4) In 2015 PW Properties Sdn Bhd formerly known as Liang Hwa Farms Sdn Bhd

There is a spike in 2017 revenue was mainly due to revaluation of non current asset with a revaluation surplus of RM 61,288,579.

Assets and Liabilities

Although PWF undergo restructure from 2010 to 2012 the asset value of the companies is maintain and PWF manage to reduce the liability and hence the debt ratio of thought out the period. PWF manage to grow their asset value over time while maintaining the liabilities. Most asset value gain are mainly through revaluation of non current asset

Year	Revaluation Surplus (RM)
2017	61,288,597
2012	89,800,000

Trade Receivables

After 2012, PWF trade receivable past due had decrease to around 30 %.

Financial Ratio

There would be few financial ratios to be look at here:

1)  Interest Coverage Ratio (Green Bar Chart)

2) Cash Ratio (Blue Line Chart)

3)  Current Ratio (Red Line Chart)

1) Interest Coverage Ratio

Interest coverage ratio measure how capable the company pay off the existing debt. With an interest coverage ratio above one mean the earnings before interest & tax (EBIT) is able to pay of the full amount of the financial cost of the year.

Despite lower EBIT in the recent year, PWF had maintain interest coverage ratio above one after 2012 and recently had increase the interest coverage ratio to 4 in 2018.

2) Cash Ratio

As cash is the most liquid assets of the company, cash ratio is use to determine company ability to pay off short term liabilities using cash. Cash ratio above one indicates that company able to settle all current liabilities using available cash.

PWF had low cash ratio less than 0.10. PWF operate in low cash reserve as most reserve is use for expandsion as a few acquisitions and investment in properties had done over the period.

3) Current Ratio

Current ratio measures ability of the company to pay off short term obligation (current liabilities). Current ratio above one means the company able to pay off the current liabilities with current asset.

PWF current ratio is maintain around 0.9 which is 10% below one. Despite low cash ratio, PWF had substantial amount of current asset to have a current ratio about 0.9.

Turnover in Days

Let look into three types of turn over as follow:

1) Inventory Turnover (Blue Line)

2) Trade Receivables Turnover (Red Line)

3) Trade Payable Turnover (Green Line)

1) Days Sales of Inventory

9 Years Days Sales of Inventory Median (days) – 75

PWF days of sales of inventory had drop significantly from 100 days to 40 days. This mean PWF manage to sell their inventories faster in 2018 compared to 2010.

2) Trade Receivable Turnover (Days)

9 Years Trade Receivable Turnover (Days) – 30

PWF trade receivable turnover is quite constant at around 30 days.

3) Trade Payable Turnover (Days)

9 Years Trade Payable Turnover (Days) – 30

After 2014 PWF to maintain it trade payable turnover above the receivable turnover. This indicated PWF manage collect money from its receivable and use the money to paid its payable

Per Share Analysis

PWF per share analysis is adjusted to 2:1 split in 11 July 2016

1) Earnings per share (sen) (Blue Bar)

2) Dividend per share (sen) (Red Bar)

3) Net total assets per share (Green Line)

1) Earnings per share

PWF had inconsistent earning per share. This is mainly due to disposal of non current asset and revaluation of non current asset.

In 2015 there is a drop in Earning per share because in 2015 ESOS is introduce and dilute the share outstanding.

2)  Dividends per share

PWF did not give out dividend consistently. After 2015 there is a consistent annual dividend pay-out however the dividend payment amount is varies.

3) Net total assets per share

There is a significant drop in net total assets per share in 2015 because ESOS is introduce and diluted the share outstanding. Share outstanding in 2014 after adjustment is 118,116,128 while in 2015 the share outstanding increase to 143,287,548 which is 21 % increase.

Director’s Remuneration

Some company paid high remuneration to director despite low profit. Let see how much is PWS director’s remuneration in comparison to staff fee and operating profit.

On average PWF director remuneration is around 12.30 % of the total salaries expenses.

Except 2012 where the operation profit is low, PWF director remuneration around 14 % of the operating profit.

ESOS and Warrant

As of 31^st December 2018 the ESOS are as follows:

ESOS	Exercise Price	Balance
I	0.575	656,000
II	0.62	100,000
III	0.96	1,600,000
IV	0.81	3,325,000

On 13^th April 2016, three free warrants is issued to every ten ordinary shares. As of 31^st December 2018 the warrant details as follows:

Warrant	Exercised Price	Expiring Date	Balance
2016/2021	0.62	20th July 2021	43,807,863

Material Ligation

On 28 November 2017, PWF subsidiaries  PW NutriEgg Sdn Bhd (PWNSB) had commerce legal proceedings against Dehias holding Sdn Bhd (Dehias) on refund of the RM 7,148,087 paid to Dehias for a bumiputraland which unable to registered under the name of PWNSB.

PWNSB also commerce legal procedures against Ong Teik Beng (“OTB”) for the refund of breakage fee of RM 1,429,790 which they withdraw later on 5^th November 2018.

The land purchase had cause PWNSB RM 8,577,877 which unable to transfer name of the company. RM 7,148,087 which is still under the book under other receivable as of 31th December 2018.

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