Ta Win Holdings Berhad (TAWIN, 7097, RM1.71)

Ta Win Holdings Berhad, manufacture and market enamelled copper wire for end users in the electrical products market. Copper, in general is a very ductile metal with excellent electrical conductivity properties. The term conductivity here, is the material's ability to conduct an electric current. Therefore, copper has been widely used in the electronics, automotive and household appliance manufacturing industries. TAWIN's copper businesses are located in Malaysia, Republic of China, Republic of Mauritius and Hong Kong. The manufacturing arm of the products are mainly located in Malaysia and China whereby the other offices are used to market its products.

Looking back at the results above, for the 9 months of FY2006, TAWIN was able to achieve an EPS of RM0.50 compared RM0.16 for the entire FY2005. With this excellent results, TAWIN share price was able to rally to a high of RM2.40 on 29 December 2006 before plunging and erasing all its gains soon on 5 January 2007. Is the syndicate behind the huge drop that erased 30% of its market capital in a day? The price soon drift further to end the week at RM1.71. Can the huge drop be related to the global commodity market?

Prices of copper are mainly volatile, whereby the average range for FY2005 is between USD3,000 ~ USD4,600 per MT and FY2006 at between USD4,700 ~ USD9,000 per MT. The copper price hit a 10 year high of USD8,800 per MT in May 2006 and it went lower to close at USD5,600 per MT this week. The major correction is mainly attributed to a slowdown in global growth but analyst believed that the copper price might see some rebound towards the end of 2007 going forward to 2008. One must also note that the commodity price is more of a "supply = demand" equation, whereby any disruption of supply or surge in demand could quickly push the prices back up or vice versa. However, at the moment, the copper supply has outpaced the demand thus surpressing the prices.

The copper prices tabulated in the table above represents the average prices over the 3 months period of review. In the first quarter of 2006, TAWIN made an EPS of RM0.105 at an average price of USD5,000 per MT. However, should the copper price dips further and remains at the level of USD4,500 per MT for the remainder of 2007, it should translates to an est. EPS FY07 : RM0.20; est. PE FY07 : 8x @ RM1.71. Cheap or costly? What I am trying to point out here is that should the copper price drops further, TAWIN's valuation is never stretched.