Tuesday, December 2, 2014

BBPlas ... Net Cash & Beneficiaries Of Falling Oil Prices

Its revenue from the export market has been increasing. It invest RM13 million in a new multilayer stretch film machine to boost its capacity in anticipation of higher export demand on the back of a recovery in global demand for manufacturing.

For the nine months ended Sept 30, 2014 (9MFY14), BP Plastics saw its export revenue expanding to RM167.1 million from RM132.8 million a year ago, accounting for 78% of the group’s revenue, up from 75.7%.

The group is targeting Asia as its primary market as it believes that it will remain the fastest growing region in the world over the next decade.

BP Plastics’ net profit for 9MFY14 rose 4.8% to RM7.83 million from RM7.47 million a year ago, while revenue increased 22% to RM214.28 million from RM175.64 million in 9MFY13. This was despite weaker third quarter results.

With the softening of polyethylene prices and its group’s continuing efforts on cost-optimisation efforts, it hope to achieve a double-digit growth in top-line and bottom line for FY15 ending Dec 31, barring any unforeseen circumstances.

Plastic packaging companies are seen as beneficiaries of falling crude oil prices — the cost of raw materials such as resin are closely related to that of oil.

The company used to rake in 10% to 11% in pre-tax margins in 2009 and 2010, but such margins have since come down to 5.7% in 2013.

BP Plastics’ net cash position stood at RM36.2 million, with zero borrowings as at Sept 30, 2014

On plans for the cash, it will be used as investments in technology machines, for working capital, not discounting any future potential mergers and acquisitions opportunities.

The group has a target to distribute a minimum 40% of its profit after tax as dividends, paid out RM9 million in dividends in 2013, equivalent to an 89% payout.

Meanwhile, based on its earnings per share of 5.61 sen in FY13, it trades at a historical price-earnings ratio (PER) of 14.4 times and a current PER of 13.8 times. This compares with its peers Scientex Bhd and Thong Guan Industries Bhd which are trading at current PER of 11.25 times and 7.9 times respectively.

BBPlastics is the top three stretchfilm manufacturers in Malaysia and is one of the key polyethylenefilm manufacturers in Malaysia.

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