Our website is made possible by displaying non-intrusive online advertisements to our visitors.
Please consider supporting us by disabling or pausing your ad blocker.
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.
Ever since coming across an article suggesting that the packaging sector would benefit from the growth of online retailing, I have been hunting for packing companies. My search went beyond Bursa and included US.
Why the US? In 2023, the total return (dividend + capital gain) for the Bursa KLCI was about 3%. The S&P 500 achieved 26%. Even accounting for forex losses, you can see why the US is better. But this does not mean buying blindly. You still need to do fundamental analysis. Take the example of Avery. https://i.postimg.cc/C1cQgNs2/Avery-Dennison.png
This is NYSE a global materials science and digital identification solutions company. Despite its acquisitions, its revenue only grew at 4.4% CAGR over the past 10 years. While ROE and net margins have been trending up, there were no improvements in other operating parameters, I think that the stock is fully priced.
On the other hand, Bursa Asia File has diversified into food packaging. Not exactly sexy, but it has a margin of safety. The only concern is how long it will take for the market to re-rate. If I can find an equivalent US packaging company, that would be priority. In the absence, Asia File is there. https://www.i4value.asia/2021/03/are-these-outstanding-stocks-what-to.html#more