Psahaan Sadur Timah Msia Bhd

Perstima (Fundamental: 2.05/3, Valuation: 1.4/3) is the country’s sole manufacturer of tinplates used in various forms of packaging, for liquid milk, processed food, dry food, paint, motor oil, beer, beverage and edible oil, amongst others. 

Founded in 1979, it has two factories in Johor and Vietnam with a total annual production capacity of 200,000 MT. Directors, Hiroshi Kume and Rin Nan Yoong, control 32.85% of the company via a private vehicle. Three other Japanese corporations own a collective 34.7% stake in Perstima. 

Whilst the company’s earnings and growth outlook remain challenging, the stock should appeal to yield-seeking investors. In fact, its shares have out-performed the FBM KLCI over the past one-year period. 

The relative resilience of its share price is due, at least in part, to higher than market average yields. 

For FYMar2015, net profit was up 5% on the back of just about 1% growth in sales, lifted by higher selling prices, volume demand and partial reversal of inventory provisions made in the previous financial year. 

Perstima has proposed a final dividend of 20 sen per share for FY2015, on top of the 15 sen per share interim dividend already paid in December. Total dividends are the same as that paid in FY2014, translating into a payout ratio of 82%. This gives shareholders a generous net yield of 7.9% at the current price of RM4.43.

Importantly, the company generates steady positive free cash flow and has been building cash. Net cash stood at RM114.9 million at end-March, up from RM35.8 million in FY2010. This translates into cash of RM1.16 per share or a substantial 26% of its current market capitalisation. 

Looking ahead, operating conditions will stay challenging, due to aggressive importation of tinplates from China and South Korea as well as competition from alternative packaging materials and rising costs. 

This article first appeared in The Edge Financial Daily, on June 3, 2015.