INVESTMENT MERIT
- FY12 in line. In the recent reporting season, Tomypak’s reported
FY12 net profit (NP) of RM17.2m came in within our expectations of RM17.6m and
that of the consensus of RM17.3m. Its FY12 NP rose 51.3% from RM11.4m to RM17.2m,
driven by a better sales mix and a lower cost of production. Net margin of the
group surged to 8.0% in FY12 from 5.4% in the preceding year. The company
declared a final NDPS of 2.0 sen (ex-date: 14th of March 2013), bringing the
full-year FY12 NDPS to 7.5 sen, yielding 6%.
- Less exciting catalysts going forward. The packaging industry
players, Tomypak included, experienced a re-rating when Scientex acquired GW
Plastic in Nov 2012. However, we expect the industry to be less exciting in
2013 due to a lack of fresh catalysts. In addition, we believe that M&A activities
are less likely to happen in 2013.
- Profit-taking time. The share price has risen 16.4% since our
first recommendation in Oct 2012. We believe that now could be the time to
review our call since there is lacking of price catalyst for the near-term and
given the limited upside to our TP of RM1.30. At RM1.28, the stock is trading
at 6.9x FY13 PER, which is in line with the small caps’ forward PER of 7.0x.
Thus, we recommend investors to take profit for now. We will review the stock
again when fresh price catalysts arise.
SWOT ANALYSIS
- Strength:
Continuously improving its productivity, operational efficiency and the quality
of its flexible packaging material with new techonolgy and skills.
- Weaknesses: Its
earnings profile can be volatile.
- Opportunities:
(i) Ventured into new markets particularly the F&B industry in the emerging
markets like Vietnam and Indonesia, (ii) There are still boundless new
opportunities available, particularly in the emerging markets where the demand
for flexible packaging will increase if the F&B packaging standards in
these markets improve and (iii) potential benefit from corporate exercises
(i.e. M&A.) judging from the recent trends.
- Threats: High
oil price volatility may hit the company’s earnings.
TECHNICALS
- Resistance:
RM1.30 (R1), RM1.41 (R2)
- Support: RM1.15
(S1), RM0.97 (S2)
- Comments:
Tomypak's overall uptrend remains intact although the technical picture is
starting to show bearish divergent signals. The remaining indicators have also weakened,
and we expect very limited upside from here. Look to take profit for now.
THE COMPANY
Tomypak Bhd is one of the leading coverter for flexible food
packaging materials in Malaysia. It was established in 1979 and listed on the
Main Market of Bursa Malaysia in 1996. Through its subsidiaries, the company manufactures
and trades plastic packaging materials, polyethylene, polypropylene films and
sheets, and thermoforming sheets.
THE BUSINESS
- Through its core subsidiary, Tomypak Bhd, plastic
packaging materials are supplied to local and foreign manufacturers involved in
food products and additives, cosmetics and toiletries, and pharmaceutical and
prophylactics sectors. 90% of its products are distributed to the F&B
industry. Its key customers like Nestle, Kraft, Hup Seng, Mamee, Apollo Food
contribute c.70% of its revenue.
- Its product range can be classified into high barrier
packaging materials for high barrier vacuum matellized laminates through plasma
technology, snack food packaging, instant noodles, confectionary, seasoning,
household products and pet food packaging.
Source: Kenanga
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