Insider Asia’s Stock Of The Day: UPA Corporation

upa-corporation-bhd_swm_theedgemarkets

-A +A

insiderasia-logo_theedgemarkets

Insider Asia’s Stock Of The Day: UPA Corporation Bhd

UPA (Fundamental: 2.5/3, Valuation: 2.6/3) is mainly involved in the manufacture of diaries, other paper related products and packaging material in rigid films. It is also the sole agent for Komori, the leading brand of printing machines in Japan. 

The company has approximately 600 employees and 4 factories. Two of the factories in Kuchai Lama manufacture diaries and other paper related products while two others in Seri Kembangan are used to produce packaging material and perform reconditioning and refurbishment of used printing machines. 

Whilst growth has not been “exciting”, earnings have held fairly steady. That, in turn, helped UPA build cash and maintain consistent dividend payments. Its share price too has been in a broad uptrend over the past 3 years — rising at a CAGR of 17.5%.

Valuations remain attractive at trailing 12-months P/E of 9.65 times and just 0.72 times book value. In 2013, dividends were raised to 8 sen per share, from 6 sen in 2011-2012, or equivalent to 50% of profits. The company has declared a similar 8 sen per share dividend for 2014 and will trade ex-entitlement on July 13. At the prevailing price of RM1.80, this would return a higher-than-market average yield of 4.4%.

Slightly more than half of the company’s revenue is derived from exports, with key markets being North America (22.2%), Asia Pacific (18%) and Europe (10.3%). 

Financial performance for the company has been steady. Save for the dip in 2011, net profit has ranged between RM12.4-RM14.4 million since 2010. For 1Q2015, revenue rose 66.5% to RM48 million while net profit expanded 59.4% to RM3.96 million. 

UPA has a high fundamental score of 2.5 out of 3, thanks to its strong balance sheet. The company has gross borrowings of RM21.3 million but interest cover is a very healthy 61 times. 

Indeed, net cash has been expanding steadily from RM15.6 million in 2010 to RM26.5 million at end-March. That is equivalent to nearly 20% of its current market capitalisation of RM139.2 million. 

upa_fd_01June2015_theedgemarkets

This article first appeared in The Edge Financial Daily, on June 1, 2015.