Question 2: EKLDESA’ one pager write-up

Based on 3 years’ historical financial year, the company has performed very
well as the revenue increase three years in a row since 2016. Its net profit
also increased in line with expanded revenue.

The company’s earning is driven mainly by its hire-purchase financing

underpinned by higher transaction in the used car market. The hire-purchase
division contributed 98% of pre-tax profit according to local broker house.
Moreover, the furniture segment had started to generate profits following
management’s strategy to focus on expanding domestic market.

We foresee sanguine outlook underpinned by management’s move to

further expand its scope of financing for cars price at below RM35,000 (from
< RM20,000) will boost earnings in the near term. In addition, further
expansion of leverage via increase in total borrowing will further drive
earnings in the future.

Maintain BUY based on a CY19 Price Target of RM1.82, which is

translating to a 13x PER CY19 based on projected EPS of 14 sen. The
downside risks –some people prefer to use E-hailing services (Mycar & Grab)
and cheap public transportation than own a car.

Its peer is AEONCR involve in hire purchase space, albeit with mixed
exposure in other financing segments. Though, ELKDESA is medium cap
counter, ELKDESA has higher dividend of 5.04% as compare to AEONCR of
2.53%.