MASTER is primarily engaged in the business of manufacturing fully recyclable corrugated cartons, wooden packaging and providing one-stop packaging solutions to its customers, warehousing as well as vendor managed Inventory. Over the last 30 years, MASTER had made a name for itself as an innovative niche market player in the packaging industry with the operation in Malaysia and Vietnam. Currently, the group’s turnover is spread over a multitude of industries with the top five leading industries being solar energy, food-beverage & agro based, electronics & electrical, converter and ceramics.

MASTER sees promising prospect ahead because packaging plays a significant role in the preservation and protection of consumer products from physical damage and to provide aesthetic and branding appeal. Overall, the group expects solar industries (FY19 revenue: 67%; FY20 revenue: 47%) to outperform in the coming years amid robust demand of solar module due to the continuing policy support and increasingly favourable economics for solar power over other types of electricity. Notably, Bloomberg Intelligent expects the annual solar capacity to increase by 20% CAGR from FY21-23, which translated into greater solar module demand (#Figure2).

Although short term outlook are likely to be affected amid rising raw material costs (#Figure 1) and challenging operating environment in Malaysia and Vietnam following the Covid-19 outbreak, MASTER is cautiously optimistic of FY21 earnings owing to its diversified customer clientele and most of its major customers are able to operate without abnormal restrictions. In anticipation of more economic re-openings in both countries, we reckon MASTERS’ outlook would gradually improve. MASTER is currently trading at trailing 6.9x P/E (18% discount against its peers’), supported by healthy profit margin of 10% (19% higher than peers) and solid balance sheet (net cash/share RM0.53). After recent correction from RM 2.06 (19 Jan) to a low of RM 1.66 (8 July), MASTER is pending for a rounding bottom formation rebound. A strong breakout on its neckline RM1.81 will spur the price toward RM1.87-1.94-2.08 levels. Collection range is RM1.72-1.77. Cut loss at RM1.66.

Source: Hong Leong Investment Bank Research - 20 Sept 2021