Sector: Trading/Services
Company Background:
1) BCM involved in the distribution of commercial laundry equipment (15 years) & medical devices (10 years) in Malaysia.
2) Subsidiaries:
a) CS Laundry System Sdn. Bhd. (100%) – supply, testing, installation and commissioning of commercial laundry equipment.
b) Best Contact (M) Sdn. Bhd. (100%) - supply, testing, installation and commissioning of medical devices.
c) Maymedic Technology Sdn. Bhd. (100%) - supply, testing, installation and commissioning of medical devices.
d) Cypress Medic Sdn Bhd (51.03%) – trading & distribution of surgical, implants and clinical devices such as blood monitor, nebuliser, thermometer, body fat monitor and sphygmomanometer for the medical devices market in Malaysia. (effective from 09 February 2018)
3) Revenue contributed by business segment
Commercial Laundry Equipment – 58.7%
Medical Devices – 37.4%
Healthcare products – 3.9%
Financial highlights based on Q12018 (latest):
1) Revenue (4Q17 VS 1Q18) increased from RM20.3mil to RM24.3mil (increase 20%)
This is due to contribution from commercial laundry equipment business segment as more outlets has been set up.
2) Revenue contribution from medical devices business segment was consistent.
3) There is a recognition of negative goodwill pertaining to the acquisition of new subsidiary (Cypress Medic Sdn Bhd ) amounting RM728K during this quarter.
Prospects:
1) Setting up of Speed Queen self-service launderette outlets
2) Continuous expansion of existing portfolio of products and brands
3) Expansion of healthcare products segment in year 2018
4) To broaden new customer base and continuous enhance relationship on existing customer base
5) Management expects medical device division to be key engine for earnings growth in the future as they expect to see slowdown in laundry equipment business due to market saturation.
6) To expand its medical devices segment, BCM acquired 51.03% stake in Cypress Medic Sdn Bhd (healthcare company), with profit guarantee of RM600K during first year.
7) Aiming to transfer from ACE market to main board in next two years (not much details shared)
Risks:
1) Forex risk – USD & EUR
Strengthening of 10% for both currencies brings about 2% contribution to their profit.
2) Market saturation & high competition for laundry equipment business in Malaysia market (limited growth).
Notes:
1) Director’s shareholding is about 52% of total shares.
2) ⚠️ Director’s remuneration is too high! FY2017 is RM3.2mil in total, about 47% of the profit.
3) Management’s direction is clear with plannings (towards healthcare sector).
4) ⚠️ Not much information was shared for overseas expansion.
Technical analysis:
The chart formed a small cup & handle, next resistance at 0.20 & 0.23 level.
DISCLAIMER: This is not a call buy or call sell recommendation, this post is intended for learning and educational purposes only, please trade at your own risk.
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