Willas-Array - CIMB Research 2017-09-20: Opportunities In Distribution

Willas-Array - CIMB Research 2017-09-20: Opportunities In Distribution WILLAS-ARRAY ELEC (HLDGS) LTD BDR.SI

Willas-Array - Opportunities In Distribution

  • Willas-Array Electronics (WAE) is an established electronic components distributor.
  • The company was listed on the SGX in 2001 and dual-listed on the Stock Exchange of Hong Kong in 2013.
  • Management expects market conditions to be challenging in FY18F but still sees growth opportunities in the automotive and home appliances segments.
  • We note that a single supplier accounted for 40.7% of WAE’s FY3/17 purchases.
  • WAE trades at a historical FY17 P/BV of 0.6x and FY17 dividend yield of 6.8%.

What it does 

  • Willas-Array Electronics (WAE) was established in the early 1980s and listed on the Main Board of SGX in 2001. The company also dual-listed on the Main Board of The Stock Exchange of Hong Kong in 2013. 
  • WAE is engaged in the distribution of electronic components used in industrial, audio and video, telecommunications, home appliance, lighting, electronic manufacturing services and automotive segments. The company also provides engineering solutions.

Established player 

  • Backed by long-standing relationships with more than 20 internationally-reputable principal suppliers, WAE distributes over 10,000 product items to over 3,000 customers.
  • Its main markets are China, Hong Kong and Taiwan. WAE has established a network of offices that are strategically located in Beijing, Chengdu, Chongqing, Guangzhou, Qingdao, Shanghai, Shenzhen, Xiamen and Zhongshan. 
  • It has a subsidiary in Shanghai, which serves as a logistics centre for the group in Northern China.

Key business segments are telecommunications and industrials 

  • In FY17, China accounted for 98% of revenue, while Taiwan accounted for the remaining 2%. 
  • WAE’s three largest revenue contributors in FY17 were telecommunications (27%), industrials (22%) and home appliances (13%). 
  • The automotive segment registered the strongest yoy revenue growth of 32.4% in FY17 and accounted for 11% of sales in FY17 (FY16: 9%).

Key risks are customer concentration and supplier risk 

  • According to management, in FY17, sales to the group’s five largest customers accounted for approximately 20.0% of total sales for the year and the single largest customer accounted for approximately 5.9% of revenue. 
  • Purchases from the group’s five largest suppliers accounted for approximately 87.7% of WAE’s total purchases for FY17 and the single largest supplier accounted for approximately 40.7%.


  • Management expects market conditions to remain challenging in the year ahead, in line with China’s slowing economic growth. Although it admits that the electronic components industry is unlikely to experience exponential growth in the near term, management is confident that WAE’s business is viable because of the diverse usage of electronic components. 
  • Management plans to focus its resources on potential growth segments, such as automotive and home appliances.

Historical valuations 

  • WAE trades at a historical FY17 P/E of 8.7x (local peers’ average: 30.2x) and P/BV of 0.6x (local peers’ average: 0.74x). 
  • Historical FY17 dividend yield was 6.8%. 
  • Net gearing at end Mar-17 was 0.95x.

Target Price: N/A

William TNG CFA CIMB Research | http://research.itradecimb.com/ 2017-09-21
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