NTPM Holdings Bhd
(Sept 14, RM0.75)
Maintain neutral call with a higher target price (TP) of 70 sen: NTPM began its financial year ending April 31, 2016 (FY16) with a solid set of results, registering an 84.5% year-on-year (y-o-y) increase in earnings to RM12.9 million, accounting for 26.1% of our full-year FY16 estimates. 

Revenue grew steadily at 8.4% y-o-y to RM143.4 million, which is 25% of our FY16 forecasts. Overall, results were within expectations and we are optimistic that the group will continue chalking up steady growth in the near to medium term. 

We continue to like NTPM for the encouraging outcome of its latest venture into the Vietnam market; effective cost control by proactive management; and strong balance sheet, on top of a decrease in net gearing to 0.39 times in the first quarter of FY16 (1QFY16) compared with last year’s 0.42 times. 

We maintain our “neutral” call, but raise our TP to 70 sen on an unchanged 14 times price-earnings ratio multiple to our rolled-over forecast FY17 earnings per share of five sen.

Segmental revenue for paper products rose by 2.3% y-o-y, registering revenue of RM96.8 million compared with RM94.6 million in 1QFY15. 

Profit before tax (PBT) for its 1QFY16 grew 46.7% y-o-y to RM13.6 million, owing to effective cost control efforts undertaken by the management. As a result, its pre-tax margin improved to 14% compared with 9.8% in 1QFY15.

Sales of personal care products for 1QFY16 jumped 23.9% y-o-y to RM46.6 million, primarily due to baby diapers’ strong performance. 

Meanwhile, PBT improved by 6.6 times to RM4.2 million, boosted by a combination of stronger sales and higher margins on the back of lower selling, distribution and operating costs. 

The pre-tax margin improved from 1.5% in 1QFY15 to 8.9% for the quarter under review. — PublicInvest Research, Sept 14

This article first appeared in digitaledge Daily, on September 15, 2015.