Tomypak Holdings Bhd (Nov 4, RM0.98)
Maintain outperform with revised target price of RM1.67 from RM1.52: Tomypak’s 3QFY11 earnings resurgence should continue over the next few quarters. The strong demand for its products during these uncertain times is affirmation of the defensive nature of its business. Adding to its appeal is its net dividend yield of 6% to 8%.
Despite being 82% of our full-year forecast when annualised, 9MFY11 core net profit was within expectations as 4Q should be a stronger quarter. Our target price, based on 6.2 times CY13 price earnings ratio or a 30% discount to Daibochi’s target PER, rises with its rollover to end-2012. We reiterate our “outperform” call.
Bouncing back in 3QFY11 Tomypak experienced a strong earnings recovery. Earnings before interest, tax, depreciation and amortisation (Ebitda) for 3QFY11 jumped 30% quarter-on-quarter as the Ebitda margin ticked up 3.1% points q-o-q to 13.3%.
But net profit advanced by only 21% q-o-q due to a higher tax rate of 26%. The tax rate should return to the early teens in the next quarter due to new reinvestment incentives. Raw material prices were stable in 3QFY11, which was not the case in 2QFY11 when crude oil prices had gone as high as US$115/barrel.
On average, raw materials account for 70% to 75% of Tomypak’s production cost and most of its raw materials are derivatives of crude oil. The crude oil price is currently around US$90 per barrel.
Tomypak declared a 1.5 sen tax-exempt dividend per share (DPS) in 3QFY11, which was within expectations. This takes year-to-date DPS to 4.3 sen. What do we think? The worst appears to be over. If the EU crisis worsens and the US economy deteriorates, the crude oil price could tumble over the next few quarters, which should benefit Tomypak.
Product demand remains strong as most of its customers are either local or from within Asean. The company was unscathed by the 2008 financial crisis and we see no reason why it should be any different this time.
Investors should accumulate this stock for its defensive qualities. Some 90% of its sales come from the resilient food and beverage sector and downside is capped by its 6% to 8% net dividend yields. — CIMB IB Research, Nov 4
This article appeared in The Edge Financial Daily, November 8, 2011.
Maintain outperform with revised target price of RM1.67 from RM1.52: Tomypak’s 3QFY11 earnings resurgence should continue over the next few quarters. The strong demand for its products during these uncertain times is affirmation of the defensive nature of its business. Adding to its appeal is its net dividend yield of 6% to 8%.
Despite being 82% of our full-year forecast when annualised, 9MFY11 core net profit was within expectations as 4Q should be a stronger quarter. Our target price, based on 6.2 times CY13 price earnings ratio or a 30% discount to Daibochi’s target PER, rises with its rollover to end-2012. We reiterate our “outperform” call.
Bouncing back in 3QFY11 Tomypak experienced a strong earnings recovery. Earnings before interest, tax, depreciation and amortisation (Ebitda) for 3QFY11 jumped 30% quarter-on-quarter as the Ebitda margin ticked up 3.1% points q-o-q to 13.3%.
But net profit advanced by only 21% q-o-q due to a higher tax rate of 26%. The tax rate should return to the early teens in the next quarter due to new reinvestment incentives. Raw material prices were stable in 3QFY11, which was not the case in 2QFY11 when crude oil prices had gone as high as US$115/barrel.
On average, raw materials account for 70% to 75% of Tomypak’s production cost and most of its raw materials are derivatives of crude oil. The crude oil price is currently around US$90 per barrel.
Tomypak declared a 1.5 sen tax-exempt dividend per share (DPS) in 3QFY11, which was within expectations. This takes year-to-date DPS to 4.3 sen. What do we think? The worst appears to be over. If the EU crisis worsens and the US economy deteriorates, the crude oil price could tumble over the next few quarters, which should benefit Tomypak.
Product demand remains strong as most of its customers are either local or from within Asean. The company was unscathed by the 2008 financial crisis and we see no reason why it should be any different this time.
Investors should accumulate this stock for its defensive qualities. Some 90% of its sales come from the resilient food and beverage sector and downside is capped by its 6% to 8% net dividend yields. — CIMB IB Research, Nov 4
This article appeared in The Edge Financial Daily, November 8, 2011.
