Visit Note
- Box-Pak’s Vietnam operations provided growth for the company in the past four years, growing by a CAGR (FY05-09) of 32.5% (vs. Malaysia of 5%). Given the strong prospects in the Vietnam market i.e. 3x Malaysia’s population size, high proportion of young adults (about 62%), increasing trade liberalisation and early phase of industrialisation, we believe Box-Pak will be a key beneficiary. As it stands, Box-Pak will be expanding its Vietnam operations by increasing its capacity by 2,000t/m in mid-2010 (to 6,000t/m) and by another 2,000t/m (to 8,000t/m) in 2011.
- Assuming Box-Pak expands its Vietnam plant from 4,000t/m to 6,000t/m by mid-10 and operating profit margin normalises at a conservative 10% (when raw material prices climb up) vs. 12-13% in 3Q-4Q09, we estimate FY10 net profit to be at RM17.6m, representing 21.5% growth yoy. Beyond 2010, growth momentum would be spurred by full-year impact from the higher capacity, additional capacity expansion as well as greater economies of scale.
- The stock is currently trading at FY12/10 PER of 5.4x, which is relatively low in comparison to its 3-year average historical forward PER of 8x. We value Box-Pak at RM2.35/share based on 8x FY12/10 EPS.
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