Monday, 22 May 2017

Will John Cena buy this stock ?

The latest announcement from Bank Negara Malaysia on the economic performance of Malaysia in 1st Quarter of 2017 had definitely took many with shock as GDP is recorded at 5.6%, which is way above the expectation of many, including analyst. The growth is very attributable with manufacturing and exports of E&E related goods.

There is no doubt that a lot of Malaysian company that are focused in export market are seeing turnaround in their company, while many of them are reaping huge profits during this period of time as well.

Since the export market is so good, then we will definitely need to look at the segment which are inter related with the export market, and preferably the supply chain of the export market.

When we talk about export, we will talk about logistic, and it will then go down to packaging and warehousing. For logistic, I believe this theme had been looked into for the past 2 months, as we had see how share price of Gdex, Century and Complet had risen.

As for me, I think there would still be hidden gems laying around in the packaging industry.

In fact, the packaging industry had been hotly targeted for the past 1 year. We had seen the take over and privatization of Century Bond, the take over offer of Denko (food packaging). This is just to name a few, and there are a few more out there which I will let you to do your own homework in researching those out.

But for now, I would find delight in this particular company that is involved in plastic packaging of consumer products, industrial goods finishes as well as export market.  According to market research Report Buyer, the plastic packaging industry is growing at a pace of  CAGR 4.12% and expected to hit USD 1.145 trillion in 2022. One of the rising growth will be attributed to the Asia Pacific region, where emerging country are coming up and rising population are pushing the demand.

As for investing into equities, choosing the right industry is important, but what is more important will always boil down to choosing on the right company as well. And for now, I am going to unveil to you yet again a company that is in the right industry, right management, solid fundamental, good track record of dividend payment of at least 40% of net profit, sitting in a net cash position and is looking good for a corporate exercise on Bonus Issue.

Now, I will let John Cena to show you this company. If you don't like it, then go and find John Cena, he will make it right for you. Hahaha...

I know you could be asking - is there still such good stock lying around in the KLSE ? Honestly, I can't tell you it is a Yes or No, but I will show you my finding, and you will be your own judge thereafeter.

So this stock, straight forward now - Is BP Plastics Holdings Berhad (Bpplas -5100).

Bp plastic products

I will not talk so much on it's fundamental, but summarized to you that this company is now Net Cash Position and paying 8 cents dividend for the past 2 years.

In fact, I will like to tell you the 3 reasons why this company will be likely to go for a Bonus Issue.

The first reason is to use up the share premium account.

As you know, the latest amendment in the Company Acts had abolished Par value and Share Premium, but company are given 48 months to settle out the Share Premium account. The current law will only see Bonus Issue given out through Retained Earnings. The money in the Share Premium account can be used for Bonus Issue and Related Fees and Charges from Corporate Exercise.

As highlighted in the statement that Bpplas is having almost RM 5million in Share Premium account, they can use the account to pay off the for at least 2 corporate exercise. Since there are retained earning of RM 67 million, who knows if Bpplas is going for a 2 bonus share for every 3 shares held ?

The second reason is the enhance market liquidity.

As you can see here, the latest release of Annual Report 2016 had indicated that the top 5 shareholder in Bpplas is holding  approximately close to 70% of the total shares in the company. That will see probably less than 30% being floating in the market. And since this is a good company, shareholder will be even more reluctant to see their share, since the dividend is still consider very good at the current level.

For this, a bonus issue will enhance the public trading liquidity, and will also attract more fund into investing into the company.

The third reason is to cater for future growth and expansion.

Bpplas had saw the demand of the market, and had proactively invest RM 13.5 million to acquire a new 3m cast stretch film machine in 2015. The new machine will be looking to put in double digit sales growth, which is expected to see contribution in 2017.

Since the machinery will be capital intensive, and for Bpplas to keep it's dividend policy of at least 40% of net profit for distribution, it will be good for Bpplas to do a Bonus Issue now, and subsequently do another right issue with free warrant for future expansion.

Technically looking, Bpplas had broken away from a long term downtrend line. It will be looking set to challenge the horizontal resistant line in the coming days. With a good anticipation on the coming quarterly report as well as high chances of having Bonus Issue, I believe that Bpplas can rise up till it's past glorious form of at least RM 1.80 in the near future.

As for you, either you are tagging in with John Cena, or, you can tell John Cena to give you a FU finishing. Opps, now it is called "Altitude Adjustment". Haha...

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