Period 1Q12
Actual vs. Expectations
1Q12 net profit
(“NP”) of RM5.2m was broadly in line, making up 19% and 20% of the street’s estimate
and our forecast of RM27.4m and RM25.7m respectively. This is in line with our expectation
as 1H is seasonally slow as compared with the 2H of the year.
Dividends The
company declared a first interim single tier dividend of 1.5 sen per share,
which is 34% of our FY12 NDPS of 4.0 sen. This NDPS translates into an attractive
dividend yield of 6.8%.
Key Result Highlights
YoY, 1Q12 revenue
increased 12% on the back of higher sales registered by the local (+7% YoY) and
export sales (+15% YoY). The exports contribution has also improved YoY by 2ppt
to
58%.
NP YoY jumped by 16%
despite a higher effective tax rate of 22% (vs. 15% in 1Q11). This was mainly
attributable to a gross margin expansion of 40bps (resulting from the lower
cost of raw materials) as well as benefiting from an economic of scale (which
reduced the operating expenses to sales ratio from 5.7% to 5.1%).
1Q12 revenue QoQ
declined 7% due mainly to a lower sales volume and a marginally lower selling price.
Although the NP QoQ
dropped 5% (due to a higher tax bracket), the PBT actually increased 1%. The
increase was due to a forex gain in the current quarter as compared to a loss
in 4Q11.
Outlook We
continue to believe the company will benefit from a lower plastic resin price
cycle due to the gradual increase in the supply of new petrochemical
capacities. Its timely capacity expansion will also be able to capture the
rising demand for both its blown and cast films.
Change to Forecasts
Maintaining our
FY12-13E NP estimates of RM25.7m-RM35.3m.
Rating MAINTAIN OUTPERFORM
Valuation We
expect the NP to grow by a strong 31% and 37% in FY12 and FY13 respectively.
Together with its attractive net dividend yield of 6.8%, the stock offers
strong total returns of 41% to our TP of RM0.86, based on the 4-year Industry
Average PER of 8.0x over its FY12 EPS of 10.8 sen.
Risks The
global economic uncertainty could drive a price upswing in oil price, which
will in turn hit the company’s earnings.
Source: Kenanga
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