BP Plastics Holding Bhd (+ve)
BP Plastics (Fundamental: 2.5/3, Valuation: 1.4/3) rose 0.9% to a 5-year high of RM1.12 last Friday. The stock has risen by 40.2% since it was first recommended as InsiderAsia’s Stock of The Day on November 6, 2014.
BP Plastic stands to benefit from the weakening ringgit and falling raw material costs (closely correlated to crude oil prices). Export accounted for 78% of its sales last year.
For 1H2015, net profit surged 22.0% to RM7.8 million, boosted by lower resin costs, higher selling prices, and foreign exchange gains. Revenue, however, declined 9.4% to RM134.0 million, due to lower domestic market sales impacted by the implementation of GST in April.
The company declared an interim dividend of 3 sen per share for 2015, which will go “ex” on September 11. Coupled with the special dividend of 2 sen per share paid in July, dividends totalled 5 sen per share for 2015.
BP Plastics specialises in stretch and shrink films, an increasingly popular option for pallet stabilisation during warehousing and transportation of goods. With a combined annual capacity (stretch film and packaging bags) of nearly 60,000 metric tonnes, the company is one of the top three stretch film manufacturers in Malaysia.
To cater for higher export demand and enhance cost-competitiveness, BP Plastics has invested some RM13 million in a new stretch film machine, which was successfully commissioned in June 2015. It has a debt-free balance sheet with net cash of RM51.5 million at end-June, equivalent to 24.7% of its market capitalisation.
The stock is trading at a trailing 12-month P/E of 18.1 times and 1.30 times book. Excluding cash, P/E stands at 13.6 times. Dividends increased from 4 sen per share in 2011 to 6 sen per share in 2014, giving an above-market yield of 5.4%.
This article first appeared in digitaledge Daily, on August 24, 2015.