NTPM's steady growth continued

Background

NTPM Holdings Bhd ('NTPM') is involved in the manufacture and trading of paper products, such as toilet rolls, tissues, and serviette. The company offers tissue products consisting of facial tissue, toilet paper, kitchen towel rolls, and napkins under the Premier, Royal Gold, and Cutie brand names; and personal care products comprising feminine hygienic products, cotton products, baby diapers, and incontinent products under Intimate, Diapex, and Premier Cotton brand names.

Recent Financial Results

NTPM has just announced its results for 4Q2009 ended 30/4/2009. Its net profit increased by 20.6% q-o-q or 45.4% y-o-y to RM10.3 million while its turnover increased by 18.1% q-o-q or 19.4% y-o-y to RM87 million. The improved performance is attributable to an overall increase in its sale of tissue products, sanitary napkins & diapers.


Note: NTPM had a Bonus Issue of 4-for-5 which was ex on April 2.

As you can see from Chart 1 below, NTPM's top-line & bottom-line has been on a steady rise in the past 15 quarters.


Chart 1: NTPM's 15 quarterly results

Valuation

NTPM (closed at RM0.455 yesterday) is now trading at a trailing PE of 11 times (based on last 4 quarters' EPS totaling 4.1 sen). With growth averaging about 15% over the past 3 years, a rough PEG ratio is about 0.7 times. However, a more precise calculation of PEG ratio is to divide the PE ratio by the product of growth estimate (say, 10%) & dividend yield (2.1 sen/45.5 sen x 100%).

PEG ratio = PE / (Growth Estimate + Dividend Yield)
= 11 / (10 + 4.6)
= 0.75 times

A PEG ratio of less than 1 means that the stock is attractive.

Technical Outlook

NTPM broke above its downtrend line in 2006. Its subsequent uptrend has not been a steady affair. This stock tends to have sharp rally, followed by prolonged consolidation (in the form of ascending triangle or rising wedge). NTPM had a bullish breakout of a rising wedge formation at RM0.31 in April. Since then, it has been in a steep rally which has only encountered minor corrections. Would a more severe correction set in soon? Would that correction be followed by a consolidation lasting 1 or 2 year(s)?


Chart 2: NTPM's daily chart as at 29 June 2009 (Source: Tradesignum)

Conclusion

Based on good financial performance & attractive valuation, NTPM is a good stock for long-term investment. Since the stock is currently in a steep rally, gain a cheap entry is not easy. One may adopt a slow accumulation on price weakness (or, pullback to RM0.40).