Khind – not an obvious investment opportunity

[i4value]

The problem social investing sites is that every one has the same information. As such I am not so sure it is easy to make money. That is why I prefer to take a contrarian view and hunt where the crowd avoids.



A good example is Khind. You probably would not consider Khind looking at just the Fundamental Mapper. But following a detailed analysis, I found that it is financially sound with a history of returning capital to shareholders through dividends.

While recent years have seen a decline in profit margins, KHIND’s focus on improving operational efficiencies could lead to margin recovery. There is also a good margin of safety

[weijian]

Hi i4value,

Once again, thanks for another good detailed study on Khind, a msian home-grown consumer appliance brand.

The (temporary) boost in revenue in FY20/21 has been well replicated in almost all companies who derive their revenue from discretionary spending of consumers. More so for Msia-centric retailers/brands as the Gov had allowed multiple EPF re-withdrawals during covid era. Been on the lower end of the appliance brand spectrum, it would benefit disproportionally as the Rakyat who withdrew the most from EPF are probably also their clientele.

Khind subcontracts out the mfg and I would assume it is mainly to China. So it is logical to assume that their suppliers (contract manufacturers) are also their competitors. And all of them are competing in the lower end of the brand spectrum. Khind's competitors have a huge home market to sell to while Khind derives the majority of its revenue only in Msia/Spore. The future is going to be really tough if your own customers/suppliers are competitors, either present or future, and you have no way to differentiate.

[i4value]

To be transparent, I used run i-Bhd that was in the appliance business before we diversified into property. My favourite story was than in the late 90s, the Malaysian then Minister of Trade and Industry, "boasted" that Malaysia was the biggest exporter of air--conditioners with about 2 million units per year. Half came from Panasonic while OYL has about 30%. i-Bhd had a big share of the balance.  By the early 2000s, one factory in China produced 2 million units of air-cond.

You can imagine the economies of scale the Chinese manufacturers had. We give up the appliance business because the Chinese were landing their finished goods at my raw material cost. 

With hindsight, it was a wise decision to exist the appliance business. My favourite analogy is Berkshire Hathaway existing the textile business. 

Yes, the appliance manufacturing business is a tough one for Malaysia companies

[specuvestor]

wow OYL Industries Just curious did OYL ran into same competitive challenges as i-BHD? I assume they were more efficient hence Daikin took over?

Just curious and learn something from history to apply in future

[i4value]

OYL was focussed on the air-conditioning sector while i-Bhd was focussed on the digital appliance sector. 

So OYL products included industrial air-conditioners and chillers (under their own and York brands), i-Bhd had fridges, rice cookers, PC, laptops.

Malaysia is no longer the "cheap" manufacturing place. Panasonic has shifted a big part of the operations away from Malaysia.