SAC Capital: Choo Chiang: 1H21 NPAT of S$4.4m was a record, building on higher ASP and demand for home improvements. ASP enjoyed a lift from higher copper prices (YTD +30%). Demand for electrical installations and components are driven by: 1) WFH and high home sales have lifted demand for home renovations 2) Office downsizing and relocation to lower-cost. Gross margin edged higher to 29.8%. It generates high ROIC of 27% and ROE of 17.4% despite net cash of S$14.7m (S$0.071/sh), and investment property of S$13m yielding low rental. It trades at book value of S$0.24 and annualized dividend yield of 5.8%.

 

CCH distributes low voltage electrical products and accessories that are used for indoor installations in residential and commercial properties. It stocks > 40,000 line items under house brands and third-party brands. The customers are mainly renovation contractors.

 

- In the near term, there are two positive trends working in its favour: 1) surge in home sales and 2) higher copper prices.

 

- Balance sheet is strong with net cash and investment properties making up 56% of net assets. It generates strong FY20 ROIC at 8.2% (FY19: 15.1%) with zero debt.

 

- Near term headwind is the border controls that limit the number of foreign workers in the construction sector, and renovation workers that commute daily from Malaysia.