Highest Returns to Shareholders over three years:
INDUSTRIAL PRODUCTS & SERVICES: Dufu Technology Corp Bhd
Growing from strength to strength
For the second consecutive year, Penang-based Dufu Technology Corp Bhd walks away with The Edge Billion Ringgit Club (BRC) award for the highest returns to shareholders over three years in the industrial products and services sector — demonstrating that it belongs in the big boys’ club.
Main Market-listed Dufu is a Taiwanese-run firm that supplies disk spacers and other precision machining components to the hard disk drive (HDD) industry.
During the period under review, Dufu delivered a stunning three-year compound annual growth rate (CAGR) shareholder return of 130.8%. Its adjusted share price jumped from 34 sen on March 30, 2018, to RM3.61 on March 31 this year. Notably, Dufu had completed a one-for-one bonus issue on Aug 5 last year, which benefitted close to 7,800 account holders.
The company also rewarded its shareholders with a total dividend payout of RM26.1 million in the financial year ended Dec 31, 2020 (FY2020), which was its highest distribution declared within a financial year. The dividend per share of five sen represented a payout ratio of 57% — slightly higher than its 50% dividend policy.
In fact, Dufu was already acknowledged for its earning prowess two years ago before it became a billion-ringgit company. It won The Edge Malaysia Centurion Club Corporate Awards 2019 for the highest growth in profit after tax over three years in the industrial products and services sector. The Centurion Club acknowledges promising companies with a market capitalisation of below RM1 billion.
Dufu became a BRC member in 2020, with its market capitalisation crossing the RM1 billion mark required for membership on Jan 16, 2020, and stayed past that level during the membership cut-off measured that year.
According to absolutelystocks.com, Dufu’s market capitalisation has grown more than 11 times in three years, from RM175.71 million on March 30, 2018, to RM2.007 billion on March 31, 2021.
The counter continued to rise over the past six months, and at the closing of RM4.26 on Oct 15, the company was valued at RM2.271 billion. Bloomberg data shows that the stock is currently trading at a historical price-earnings ratio of about 35 times, and price-sales ratio of 6.8 times.
It is also worth noting that Dufu has been in a net cash position over the years. Its cash pile stood at RM71.8 million as at June 30 this year.
Executive chairman Li Hui Ta says he feels blessed that while Dufu’s operations in Malaysia and China had both been impacted during the various stages of the Covid-19 pandemic, the group manages to remain resilient amid the uncertainty.
“It (FY2020) was a year of significant milestones for both the group’s financial and non-financial performance,” the 62-year-old wrote in the company’s annual report.
During FY2020, Dufu reported a new record-high revenue of RM298 million, which represents a turnover growth of 19% compared to RM249.1 million a year ago.
Meanwhile, the group’s profit for FY2020 grew 16% year on year to RM51.8 million, compared with RM44.5 million a year before. The stronger financial performance was driven by the volume growth in the shipment of components for enterprise memory storage devices.
Li was appointed executive director and chief financial officer of Dufu in September 2006. He was redesignated as executive chairman in June 2015.
Li is the major shareholder of Dufu, with 20.339% equity interest as at June 25. He commenced his career as an engineering supervisor with He Li Ying Precision Industry, Taiwan, in 1981 dealing with precision components. About two years later, Li was promoted to managing director, where he was responsible for the company’s entire operations.
In 1984, Li co-set up Lee Bai Corp Ltd in Taiwan to manufacture precision quick die change systems for stamping and tooling of component parts. Six years later, he co-founded Dufu Industries Sdn Bhd to manufacture precision tooling and precision machining parts for computer-related components.
In total, Li has about three decades of experience in the precision tooling industry and in the computerised numerical control (CNC) precision machining industry.
Looking ahead, Dufu expects the operating environment to remain volatile due to the challenges stemming from the pandemic. But Li opines that Malaysia is well-positioned for an economic recovery, leveraging on the uptrend in external demand for commodities and manufacturing.
“For us at Dufu, we are seeing healthy order flow from existing customers, coupled with confirmed orders from new customers. The demand from the HDD business remains strong with the proliferation of cloud-related demand leading the charge to fuel the group’s growth,” he wrote in the annual report.
Li added that Dufu is also optimistic about the group’s non-HDD segment as semiconductor capital equipment and tech hardware spending remains strong from domestic equipment exporters.
“Our engineering and manufacturing team have been kept busy of late, focusing on execution of production process verification activities, and aligned to customers’ product design requirements and specifications.”