Friday 29 Mar 2024
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This article first appeared in The Edge Financial Daily, on October 6, 2015.

 

Psahaan Sadur Timah Msia Bhd

PERSTIMA (Fundamental: 2.35/3.0, Valuation:2.4/3.0) was first featured as one of our stock picks in June 2015, when its share price was RM4.24. The stock subsequently rose as high as RM4.58, before retracing to RM4.55 currently.

We are highlighting Perstima again for its consistent dividend stream and above market average yields. The stock is a good defensive choice having demonstrated low share price volatility, historically.

Whilst profits have gyrated over the past few years amid challenging operating conditions — it faces competition from tinplate imports from China and South Korea — dividends have been remarkably steady, supported by strong balance sheet.

Dividends were maintained at 30 sen per share in FYMar2011-FY13 and raised to 35 sen per share in FY14-FY15. In FY15, dividends were equivalent to a payout ratio of 82% and give shareholders a generous net yield of 7.7% at the prevailing share price.

The company generates positive free cashflow every year — with capex ranging from RM8 million to RM36 million annually in the past five years. This has translated into a gradually bigger cash pile — from RM36 million in FY11 to RM136 million as at end-June 2015. To put it in perspective, Perstima is able to sustain current dividends for the next four years based on its cash pile alone.

To recap, Perstima is the country’s sole manufacturer of tinplate used in various forms of packaging, for liquid milk, processed food, dry food, paint, motor oil, beer, beverage and edible oil, amongst others.

For the latest 1QFY2016, net profit rose 62% y-y to RM9.3 million on the back of higher sales volume and better profit margins. Revenue was up 6.3% y-y to RM158.3 million. The company might have benefited from lower prices of steel, one of its main raw materials.

Valuations are modest — the stock is trading at trailing 12-month P/E of 9.85 times and 1.26 times book value of RM3.64.

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