Logic Invest Research Blog

Author: loginvest   |   Latest post: Wed, 14 Oct 2020, 8:41 AM


BP Plastics Holdings Bhd 1Q FY 2020 Update Report (HOLD)

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YTD 1Q FY 20 sales were lower vs YTD 1Q FY19 sales,however profits over the same period were higher, owing to lower cost of inputs. Central banks around the world continue to cut rates; nearly all the major economies have announced growth contractions not seen over the last fifty years or more. Management has done a fine job of reducing controllable costs, however increasing trade tensions and the widening coronavirus outbreak around the world is likely to dampen the outlook for BPP over the next few quarters. Indeed, management indicates that trading conditions will remain challenging over the next few quarters. At prices below MYR 0.90 value investors will want to accumulate more aggressively.


Risks to our recommendation and target price include: i) a stronger USDMYR exchange rate, ii) an increase in resin prices and production costs, and iii) a sharp slowdown in the general level of economic activity in Asia, Middle East and Europe. Prices for ethylene and polyethylene were lower YTD 2020 vs YTD 2019. While positive for BPP’s margins, the price weakness in these materials may signal lower demand ahead.


We maintain our HOLD recommendation on BP Plastics Holding Berhad (“BPP”) whilst maintaining our fair value estimate at MYR 1.12. Looking ahead, average ROE is likely to be maintained at levels of 10-11%, whilst P-BV stands on 1.0x trailing book value and 1.0x current year book value. Importantly, BPP has a very clean balance sheet. YTD 1Q 20 total export sales amounted to about 70% of total sales, with about 63% of sales in USD, 10% in SGD and remaining in EUR & JPY. The company has a dividend policy of paying out a minimum of 40% from its net profit. We maintain our estimated dividend payments for FY 20 and FY 21 at 6 sen per share. At current prices, the prospective dividend yield is likely to remain at or above 5.0%.


BP Plastics Holding Bhd (BPPLAS) is an investment holding and provision of management services company. The principal activities of the Company, through its subsidiaries is manufacturing and trading of plastic products. Its subsidiaries include BP Plastics Sdn Bhd, BP Packaging Sdn Bhd, BP Packaging Sdn Bhd and Baoman Rubber Limited. On June 10, 2010, the Company acquired 100% interest in BPPlas Plantation Sdn. Bhd. (BPPlas Plantation). On October 5, 2010, BPPLAS incorporated a wholly owned subsidiary, Baoman Rubber Limited (Baoman)

Source: Wilson & York Securities Research - 14 May 2020

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