Monday, May 7, 2018

FW: AmBank Research - Denko Industrial: A prime proxy to a prominent floor-care player BUY, 7 May 2018




Denko Industrial: A prime proxy to a prominent floor-care player              BUY


We initiate coverage on Denko Industrial Corporation (Denko) with a BUY and fair value of RM1.76/share based on a CY19F PE of 13x. This represents a premium to its listed peers in the region which are trading at 10x. We attach a premium to Denko given that it is a stronger proxy to its key customer, which enjoys robust growth prospects. Among its peers, Denko has the highest share of orders from the key customer.


Denko is a prime proxy to its key customer's innovation and growth prospects. For 2017¬–2020, unit sales of the key customer are expected to grow at an astounding 3-year CAGR of 29%, underpinned by its constant innovation and fast-selling home appliances. Based on our projections, Denko should account for circa 30% of the key customer's total box-build requirements in CY18F (in terms of volume), rendering it the largest supplier for the customer.



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