Period  3Q13/9M13

Actual vs. Expectations 9M13’s net profit (NP) of RM94.5m was in line with the street and our estimates, making up 76% and 77% of the full-year forecasts of RM125.0m and RM122.7m, respectively.

Dividends  No dividend was declared for the quarter.

Key Result Highlights 9M13 revenue increased 11.7% on the back of higher sales registered for cans (+14.1% YoY) and cartons (+11.0% YoY) divisions, which mitigated the decline in contract packaging (-24.7%).

 YoY, 9M13 NP improved 28.2%, buoyed by better earnings from cans division, in which the PBT recorded 48.9% YoY growth, which helped to mitigate the decline in cartons division (PBT -27.4% YoY). The improvement in cans was mainly attributable to better sales resulting from the new production capacity for aluminium cans in its Nilai plant and improved demand of dry food cans from Vietnam. Improved margins were evident in cans (+3.6 ppt YoY) division, which was mainly driven by the better operating efficiency.

 YoY, 3Q13 NP increased by 13.4% on the back of stronger sales growth of 16.8%. Profitability was mainly boosted by the cans division for the reason mentioned above where the PBT improved significantly by 70.7% YoY and cushioned the lower earnings from cartons (-40.6% YoY). The weaker results from cartons division was because of the higher labour costs resulting from the implementation of minimum wage scheme in Malaysia and an upward revision of minimum wages in Vietnam. Meanwhile, the Hanoi operation, which commenced a trial run during the quarter incurred a loss of RM1.8m and also a derivative loss of RM2.4m during the quarter.

 Weaker quarter. 3Q13 NP declined slightly by 0.8% as a 2.8% QoQ PBT increase in cans division was not enough to mitigate the decline in both cartons (PBT -14.2% QoQ) and contract packaging (PBT -38.0% QoQ) divisions.

Outlook  The company has the resources to further improve its production operational efficiency and continue delivering growth. Moreover, we believe the easing raw material prices will also benefit its bottom-line.

Change to Forecasts We are maintaining our FY13E and FY14E NP of RM122.7m and RM140.3m.

Rating ACCEPT OFFER (see overleaf for details)

Valuation  While we continue to value the stock at RM3.16 based on an unchanged Fwd PER of 10x on FY14E EPS, we have raised our Target Price to RM3.30 as per the offer price.

Risks  Volatile raw material and commodity prices.

Source: Kenanga