BPPLAS: An Attractive Packaging Stock

Background

BP Plastics Holding Bhd ("BPPLAS") is a Polyethylene (PE) Film manufacturer, supplying Cast Stretch and Blown Shrink films, and other PE packaging films and bags. It exports almost 80% of its products mainly to the Asian, Middle East and European region countries. 

BPPLAS has 2 manufacturing locations within the Sri Gading Industrial Estate in Batu Pahat, Joho. These factories have a total built-up area of 295,000 square feet and a production capacity of 6,500 metric tons per month.

Recent Financial Results

BPPLAS has just announced its result for QE30/6/2018. Its net profit rose 3% q-o-q or 192% y-o-y to RM4.75 million while revenue was mixed- down 3% q-o-q but up 12% y-o-y to RM82.6 million. Revenue dropped q-o-q due to more public holidays.

PBT dropped 10% q-o-q mainly due to lower production output arising from more public holidays. Net profit rose 3% q-o-q mainly due to deferred tax adjustment.

Table: BPPLAS's last 8 quarterly P&L

Graph 1: BPPLAS's last 19 quarters' P&L

Historical Financial Performance

BPPLAS's revenue has been rising steadily over the past 7 years. Profits jumped in FY2015 & FY2016 due to favorable forex regime. This benefit has dissipated as our RM rebounded in 2017. However, RM has weakened somewhat lately and this may help to boost the bottom-line for BPPLAS.


Graph 2: BPPLAS's last 11 years' P&L

Financial Position

As at 30/6/2018, BPPLAS's financial position is deemed healthy with current ratio and gearing ratio at 6 times and 0.2 times. Cash in hand amounted to RM36 million or RM0.19 per share.

Valuation

BPPLAS (closed at RM1.00 yesterday) is now trading at a PER of 11 times (based on last 4 quarters' EPS of 9.1 sen). If the cash in hand is deducted from the share price, then BPPLAS's PER will be lowered to 9 times. BPPAS also paid a decent dividend totaling 4 sen last 4 quarters- giving it a dividend yield of 4%. Overall, BPPLAS is deemed fairly attractive.

Technical Analysis

BPPLAS has tested and rebounded off its long-term uptrend line, SS at RM0.85 in April. It is still in an intermediate downtrend.


Chart 1: BPPLAS's monthly chart as at Aug 1, 2018(Source: Shareinvestor.com)  


Chart 2: BPPLAS's mweekly chart as at Aug 1, 2018(Source: Shareinvestor.com)  

Conclusion

Based on good financial performance & position and relatively attractive valuation, BPPLAS could be a good stock for medium-term investment. However its upside potential depends on whether it can break above the intermediate downtrend. If the share price can go above RM1.10, the stock may begin its next upleg.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.