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Asia File growth 2 decades ago was driving by the stationery business. But we all know that this sector is facing some digital disruption. The company has long recognized this threat and ventured into the consumer and foodware products in 2017/18 to mitigate this.
From 2018 to 2024, the revenue from the filing segment declined from RM 352 millon to RM 268 million, a RM84 million decline. Based on the 6 months ended for 2025, we will see a continuing decline.
But the revenue from the consumer and foodware products segment has not grown enough to offset the declining filing revenue. I projected that the 2025 revenue contribution from this segment would be at best RM 50 million. At the same time, the segment margin is not as good as that for the filing segment based on 2024 results.
If I want to be positive, I would say that the declining filing segment trend seems to be slowing down looking at the middle chart. But your guess is as good as mine where the bottom will be.
From a big picture perspective, the company currently falls into the Goldmine quadrant - low investment risk, good fundamentals. The market price has also declined from the past 3 years high.
So there is still an investment case for investors with a long-term outlook and a focus on undervalued opportunities. But you must believe that the company still has time to meet the digital disruption challenge.
We have read stories about how some of the Malaysian media groups “suddenly” have to close down their newspaper operations due digital disruption. Digital disruption does not happen overnight and you would have thought that companies would have years to prepare for this.
One good example of a company that took step to anticipate digital disruption is Asia File. This is a global filing company. We all know that digital technology is changing the way we store documents and the demand for files will continue to decline.
Asia File recognized this and for the past decade, it had stopped expanding its filing business. Instead it diversified into food and consumer wares about 7 years ago. This have given it a possible non-stationery growth path. But it is not clear whether this can be as big as the stationery business. So the company is still looking for other ventures.
This good story is that its stationery business is a cash cow and it is still not clear how long it will take for the demand for files to become negligible. In the meantime, the company is using the cash and time to build up replacement businesses.