Monday, 21 August 2017

Plastic and Packaging always go hand in hand

Tough times are good times, provided you know how to capitalize that moment correctly. Many a time, we could be telling ourselves to buy when the market had dipped. But when the actual event happen, 80% of us fail to execute and rather go with emotions. That is the difference of planning, and really executing something. Comparing between an execution that is done based on planning and an execution done based on emotions and impulsive decision - It is a fact that the later factor (emotions) is far more influential.

At a tough times like this, if you can be given a chance to spot a good company with profit and dividend record at a reasonable price - Would you invest now ?

That right - I found out that BP Plastics Holdings Berhad (Bpplas) might be the company suitable for this category.

Basically, Bpplas is involved in industrial packaging and stretch film manufacturing. This segment had been touted as a high potential segment due to the growing packaging demand in the Asia region. If you would want to have a in depth information on the products and offering of Bpplas, then it will be good for you to visit their website directly for more information.

As for me, I am going to share with you my analysis - Why I think Bpplas 2Q 2017 performance will be better than the 1Q performance.

One of the core reason for the drop of net profit reported for the performance on 1Q 2017 is due to higher resin price, with resulted to higher raw material input, hence reducing the gross profit margin. Now that the price of resin is somehow positively correlated to the movement of crude price oil, a higher crude oil price will result in a higher resin price, while a lower crude oil price will see a lower resin price - theoretically speaking.

So if this chart which show a supposing lower average of crude price in 2Q compared to 1Q, it is valid to assume on a lower price of resin, and hence, a lower input cost for Bpplas as a whole. Of course, you have the rights to doubt me on my point of sharing. However, I had did a similar analysis earlier on the share of Guan Chong Berhad (GCB), depicting that the lower cocoa prices will boost the business margin moving forward. That was done when GCB is trading around the range of RM 1.05. And as a matter of fact, GCB latest result display a higher net profit albeit seeing a drop in revenue. But that is not the important thing, because the important thing is that GCB went on trading at a high of RM 1.65, and that I am talking about almost 60% capital gain in nature.

As for Bpplas, my outlook is that crude oil prices will continue to be suppressed at the range of USD 50 for another 2 to 3 years to go. It could maybe end up lower as supply gluts persist, and a drop in demand will put the oil market into high wave rough waters. Of course, as crude oil price drop, raw material prices drop, and Bpplas will have a better control over their margins.

Now, put that to some simple technical reading, Bpplas had obviously traded below the support line of RM 1.44. The drop below is contributed from the weaker equity market sentiment, but it will not be significant as the fall did not consist of huge dumping in volume.

Speaking of dividend, the company had deliver a consistent quarterly dividend for the past 6 quarters.
For the latest 4 quarter, the total dividend distributed is 8 cents. At the current price of RM 1.36, the potential dividend yield is at 5.88%.

Being a net cash company, I would expect that Bpplas will continue it's dividend policy.

Now Bpplas is almost at the rock bottom price. However, should the coming result announcement reflect a better EPS, you can expect Bpplas to trade back above to the support price of RM 1.44.

Thursday, 10 August 2017

Superman downed in rubble, but Supermax will grow with rubber

You can call me thick faced hard sell on Supermax. So, I had to tell you - Yes I am indeed thick face hard selling on Supermax, but with a condition - When Supermax is currently trading at the price of RM 1.90.

I recall those hard time during last year (2016) when one of the stock that I had been recommending is not moving despite displaying convincingly good results with growth. That stock was Arank. I remember recommending Arank when it is just trading at a mere 70 cents region, and the stock continue to stay stubborn, not until the sentiment starts to recover, and Arank starts to get it's momentum and now Arank is trading at the range of RM 1.10.

As you can see, investing during tough times takes a lot of patience in order to see your fruits blossom. But firstly, the fruit that you choose must be healthy and not infested with worms.

Now come back to Supermax.

Talking on business fundamental, Supermax is definitely a fundamentally strong company. Given consistent dividend and showing growth from year to year basis.

Despite that, Supermax is now trading at an all time low position, with share price going far back into the 2013 price range. Yes, you can argue that this company could be shun by investor due to some governance issue such as insider trading and also being accidentally involved in some political talks. But those are past and I think potential investor should not punish themselves by losing out this opportunity by clinging on the past issue. After all, past is past, and what we are going to do in the present world will determine the future.

Now, I have to tell you that the glove industry actually do not depend largely on medicine industry alone. In fact, manufacturing sector such as semiconductor industry are consuming high amount of gloves due to the operation in the cleanroom environment.

With the thriving business in the semiconductor industry, the demand for gloves usage is continue to be on the rise. Healthcare also continue to see consistent demand, while seasonal flu in various countries will push demand higher for a certain period.

Hartalega, being one of the leading gloves manufacturer in the world had recently reported a 71% increase in net profit.

I believe this surge of revenue is industry wide effect, while one of the leading factor will be the stronger USD.

For the period of Jan to Mar 2017, Supermax had a total revenue of RM 308 million. For the same comparative quarter, Hartalega had RM 527 million. Hartalega latest financial result Apr - June 2017 shown RM 601 million in revenue.

Should this be an industry wide benefit, what we can assume is that Supermax revenue could be able to linger at the range of RM 350 million, and probably looking to see EPS around 3.5 cents.

Based on a projection of annual EPS at 12.72 cents and trading at an industry PE of x 20, Supermax valuation can be looking at RM 2.50

At the current price below RM 1.90, Supermax is deem undervalued from an industry perspective.

Will Supermax wake up soon ? I hope before he wakes up, you are on boat for the ride.

Tuesday, 8 August 2017

This Underdog Can Rise Up Again !!

The latest catch in the international sports arena might have you seeing Conor McGregor taking on undefeated Champion Floyd Mayweather in the coming 23rd August highly anticipated boxing match.

On the local side, you will be seeing Deputy Prime Minister Dato Zahid vs Former Premier Tun Mahathir. Who is the Conor Mcgregor and who is the Floyd Mayweather of Malaysia, I don't know, I will let you decide.. Haha

These are big news, but somehow these kind of news can hardly enable you to profit from an opportunity resulting from such event.

Let me show you another piece of big news, which I think might be able to benefit you.

As usual, big news is usually bad news, that is because bad news sell way better than good news does. It is a fact, psychological proven in fact. Bad news always send shivers down the reader mind, thus motivates them to make frantic decisions. For example, when the market drop and the media label them as blackest day of the world - You will get nervous, and the tendency to throw / cut loss of your holding is very high. Delusional. The good part of it ? Those who know what is happening will brave themselves and take position.

Of course, now I am not telling you that the market is going to crash and fall and so on. Honestly, I don't know. It might happen, but I don't know when. But for now, what I know is that there is a massive flu happening in Asia which had stricken Hong Kong badly.

So how bad can the flu be ?

According to official source, the number of recorded flu cases in 2017 is catching towards 20,000, and this is just up to July 22. In comparison to 2016, that is just 21.2k for the whole of that year. I can tell you that flu virus are getting bad to worst, and they are evolving stronger than ever to infest and killing people silently. News sources had it that the flu outbreak had taken a toll of more than 300 lives in Hong Kong, majority of them are elderly citizen and kids. As such, hospital are full to the brim for such moment.

Of course, this is bad news for mankind. There is nothing much we can do about, except to make sure that we have enough rest and beef up our own resistance. But as such event happen, the gloves industry will always blossom.

As you can see here,big player such as Topgloves, Hartalega and Kossan had seen share price trending upwards on this event.

Beside this, smaller player such as Careplus and Comfort are also seeing similar effects

So, I would like to conclude that such event does have huge influence on share price of gloves industry. Because of this, I would like to point out to 1 underdog for this case - Supermax.

I know Supermax might be tainted with some controversy earlier, but that doesn't mean a bad horse will always be a bad horse for life. What if this bad horse can become the black horse for this case ?

Here, I will not talk much on financial statements and equivalents topic, but to point out that Supermax indeed had fallen from a great height to rest at the rock bottom stage now, where a potential break out is very possible. With Kossan, Hartalega and Topglov trending upwards and trading at high PE, Supermax can be an explosive candidate to play catch up now.

The answer for the question now lies in the control of your hand. Can Supermax break the curse of the pearl and rise back above the waters ?