Insider Asia’s Stock Pick: BP Plastics Holding

by **Cals** Thu 06 Nov 2014, 18:47

Insider Asia’s Stock Pick: BP Plastics Holding

BP Plastics Holding Bhd ([You must be registered and logged in to see this image.] Financial Dashboard)
BP Plastics is one of the leading producers of industrial plastic packaging bags and stretch film in the country. It produces a combined 60,000 metric tonnes of cast and blown films annually, catering to a customer base of more than 800 companies in over 35 countries.
Cast film has superior stretching, puncture resistance and load-retention properties and are mainly used for industrial purposes. Blown film can be turned into plastic bags according to specifications, tailored to suit packaging needs of the food and beverage (F&B) sector.
Edge Research rates this company a 2.05 out of 3 on fundamentals and 2.4 out of 3 in terms of valuation attractiveness.
The stock is currently trading at trailing 12-month P/E of 13.29 times — low relative to its 20.1% earnings growth over the same period. It is priced at just about book value of 84 sen per share. That’s lower than valuations of peers such as SLP Resources Berhad ([You must be registered and logged in to see this image.] Financial Dashboard) — price-to-book ratio of 1.9 times and trailing 12-month P/E of 15.2 times — and SCGM Berhad, whose shares are priced at 2.4 times book and 14 times P/E.
Plastic packaging companies are seen as beneficiaries of falling crude oil prices — the cost for raw materials, such as resin, are closely correlated to that of oil.
BP Plastic’s sales picked up strongly in 1H14, expanding by 38.1% y-o-y, while net profit grew 31.4% to RM6.4 million over the same period. Moving forward, the recovery in major export markets will spur demand in plastic packaging. Recent weakening of the ringgit would also help boost export revenue.
The company has a solid balance sheet with net cash of RM34.2 million. Dividends totaled 5 sen per share in 2013, translating into attractive yield of 5.9%.
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This article first appeared in The Edge Financial Daily, on November 6, 2014.