Is Can-One a Better Buy Among the other Tin Can Manufacturers?

Incorporated on 7 January 2004, Can-One Berhad (“Can-One”) was listed on the Main Board of Bursa Malaysia Securities Berhad on 29 July 2005.

Can-One is an investment holding company while its subsidiary companies are principally involved in the manufacture of metal and lithographed cans, plastic jerry cans, bag-in-box, and the manufacture, packaging and distribution of dairy and non-dairy products. Aik Joo Can Factory Sdn Bhd (“Aik Joo”), its wholly-owned subsidiary, has been involved in the manufacturing of tin cans for more than 40 years. It has evolved from a small tin can manufacturer to one of the leading tin can manufacturers in Malaysia.

Can-One Group’s venture into the manufacture of plastic jerry cans (“JC”) via Aik Joo and Canzo Sdn Bhd, another wholly-owned subsidiary company, started with 2 JC lines in 2003. It has since expanded to 50 JC lines as at current date. In order to meet customers’ demands for substitute packaging products, the Group introduced Bag-in-Box in 2008 thereby widening its range of packaging products.

Can-One’s penetration into the production of sweetened condensed milk via F&B Nutrition Sdn Bhd (“F&B”) in 2006 has also met with astounding success. With the completion of a new plant in 2008, F&B continues to strengthen its position as an OEM manufacturer with the inclusion of an additional new product, evaporated milk, to its range of products.

Based on Financial Year (FY) 2015 full year results, Can-One achieved RM 886 million turnover, which is considered to be a mid to large size enterprise. Other aspects of the company’s latest financial results are illustrated in the table below.

Since FY2011, Can-One’s revenue has been in a generally uptrend from RM 631 million to RM 886 million in FY2015, with the exception of FY2013 and FY2015 whereby there is a dip in revenue as compared to their previous years. This represents a 40% increase in 5 years or an average year to year growth of 8.87%.

In terms of net profit, Can-One achieved an increase of 2.46 times over the past 5 years but with the exception of FY2012 whereby it has achieved exceptional high net earnings due to a one off share of profit from associates. The increase in net profit is greater than the increase in revenue mainly due to the continuous improvement of cost management by the company throughout these years.

Net profit Margin wise, Can-One still scores 9.14%, which is consider an average percentage in terms of manufacturing sector. Return of Equity is average too at 11.69%.

In terms of company’s debt, Can-One has a total debt to equity ratio of 1.02 which is considered acceptable as half of the company is formed by shareholders’ equity. The company’s current ratio of 1.30 is still reasonable but cash ratio of 0.13 is considered to be very low. Having a low cash ratio may cause cash flow problems to the company during an economy crisis but for the case of Can-One, as their products are considered as fast moving consumer goods, hence its current assets are considered very liquid and able to convert into cash with ease when in need.

Dividend wise, Can-One has been paying dividend but the dividend yield is considered low at 1.15% due to very low dividend payout ratio at 0.087. The low dividend payout ratio is mainly due to the company is spending close to 75% of net earnings in capital expenditure. These capital expenditure efforts maybe the key ingredient for the company in keeping their revenue moving upwards and survive the stiff competition environment in the can and food production industries.

In conclusion, Can-One’s financial performance is considered average but it’s characteristics are pretty similar to its listed competitor such as Johore Tin Bhd or Kian Joo Can Bhd, especially on the financial ratios as well as dividend yield. Hence we can conclude that these performance results are common in the can producers sector. The advantage of Can-One over these 2 other competitor is the low PE ratio of 7.91 as compared to Johore Tin and Kian Joo which both are at the range of 10. Hence it is considered a better option relatively compared to its peers, for investors who are interested in the can producing and food processing companies.

Next quarterly results announcement should be on the month of Aug 2016 for Q2 results.

iVolume Spread Analysis (iVSA) & comments based on iVSAChart software – Can-One

Can-One has followed the overall market sentiments trending downward to a support line at around RM3.40 level. The last pivot low was around RM3.40, which also correspond to the support level at RM3.40. This is deemed as strong support from a Volume Spread Analysis viewpoint.

At this point, the stock is supported at RM3.40 and we have seen a Sign Of Strength (green arrow) on this weekly iVSAChart. Should the market break above RM3.60, we may see more test in the rising market. If you preferred more conservative entry, do wait for more Sign Of Strength before accumulating.

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This article only serves as reference information and does not constitute a buy or sell call. Conduct your own research and assessment before deciding to buy or sell any stock.