Man Wah - A multi-bagger in the making?

Man Wah is scheduled to release its FY09 Q1 result next week. From the recent press report and management update in last month AGM, I would expect their revenue and profits growth momentum to continue. It is interesting to find such a vast difference of progress between Man Wah and HTL. This can be traced back some 2 years ago when Man Wah hired Stephen Barr as their Cheers USA President from HTL USA. Man Wah\'s US strategy to sell direct to retailers is paying off. In Nov last year, they beefed up their sales team further by hiring Sam Contreras to head the sales and marketing function in the US, reporting to Barr. (Source: Furniture Today) Despite the gloomy housing market, Man Wah is gaining market share in their target segment. I think those people who could afford high class Italian sofa are switching to value (and yet quality) buy and Man Wah is offering a real alternative. The strength of Euro does help this switch. During the AGM, Man Wah\'s CFO Francis Lee assured us of the strength of their balance sheet. The majority of account receivables from US buyers are insured via factoring or credit insurance, so there will be minimal risk of bad debt. I look forward to seeing their Q1 result.

Benjamin, thank you for the insights from the AGM. Quite reassuring. Man Wah seems like an undiscovered stock. It\'s trading at just 3.7x current-year PE, according to OCBC Investment Research. U like Cacola also? It is more or less in the same furniture industry but more focused on China market. OCBC: ”We reiterate Cacola [BUY, S$0.75 fair value] and Man Wah [BUY, S$0.51 fair value] as our top stock picks within the furniture sector.”

Harlequin, I also follow Cacola but have no holding yet. Comparing the two, Man Wah has a longer history of track record and I simply understand Man Wah better. There seems to be more visible moats around Man Wah than Cacola. Let me name a few: 1. Francis Lee said with the completion of their Phase 2 factory, they are now the largest sofa manufacture in PRC, even bigger than HTL. (This fact however is yet to be verified.) As a result, their size becomes one of their selling points in US and European markets as retailers pay a premium for certainty of delivery, service, and quality which should come with size. 2. The export sales are done through Macau tax free. This Macau export licensing scheme is apparently no longer available to new player. Even HTL doesn\'t have this Macau license. It is of course questionable how long this moat can last but in the foreseeable future, it has an edge over others. 3. Their joint venture with Xiamen Comfort sealed last September demonstrated two things: (a) Man Wah offer good quality products and (b) Man Wah has a strategic desire to compete in the massage chair segment to capitalize on their increasing distribution retail network in PRC. According to my research, Xiamen is a big OEM for massage chairs and is a key supplier to Ogawa, accounting for 53% of Ogawa\'s chair production (Source: Ogawa (KLSE) IPO Prospectus in 2007). To me, this joint venture has tremendous potential in the PRC market. 4. Lastly this is not a moat as such but I admire the management. For one, Mr Wong Man Li gave 4 million of his own shares to his deputy Mr Li Jianhong as an incentive without diluting minority shareholdings. Secondly, in my personal experience, it is uncommon for a successful Asian boss / Western subordinate relationship to work out (just look at the mess HTL has created by buying German Domicil!). The success in their US strategy is a testimonial of the good working relationship between Stephen Barr/Sam Contreras and Wong Man Li/Li Jianhong.

i admire the amount of research you have done on the business. r u a fulltime investor or an investment professional? Man Wah seems like a decent business with attractive valuation. if Q1 results are strong, will the market finally re-rate it? meantime, i hv found a NextInsight pic of the CEO that u mentioned. looks ok guy.

Thanks for posting the picture here. I agree with you Mr Wong looks decent and honest though I haven\'t met him in person (he wasn\'t present in the recent AGM - was told he was in US on a trade show). I am neither full time nor in the investment field, though I am in the insurance industry and have studied investment and accounting. I started \"investing\" about 10 years ago (the first 5 being \"speculation\" buying and selling stocks and the last 5 being investing in the underlying companies). I don\'t think anyone can answer your question as the price of the stock is determined by 2 people at any point in time - the buyer and the seller, who by definition hold two extreme views. As Warren Buffett says, if the business is doing well, the price will eventually catch up. As to when eventually is, no one really knows, so all I do is to focus on the business aspects.

So............what;s the Target Price in near future ?