As a short review, the group YOY revenue increased 1.3% whereas net profit declined -28.2% drastically. The stock price has followed the trend declined -29.3% in one year. The reasons for the depressed net profit are high resin cost and unable to pass through completely to the buyers in order to maintain competitive advantage.

Anyway, I think the market reaction is over pessimistic and I personally believe the stock is being oversold. As mentioned many times in my blog, when the company is still profitable, no point to sell their stock. Rather I consider this is an opportunity to accumulate.

To make a decision whether I should continue accumulate the stock, I study their financial result result again. See exhibit 1 below.

The reasons I think the stock is being oversold are as following.

1. As mentioned in the report, the revenue increased in 4th quarter was due to higher selling price and higher demand from export market. Further, the company EBITDA increased by better production efficiencies. In my opinion, as the new factory will be completed in the first half of FY2018, this could be another growth drive for the company.
2. I think the market has ignored the company cash flow generating ability. Although the management allocated MYR 16 million to support the new factory development in FY2018, the company does not need to take in new borrowing but using internal generated fund.
3. Regarding to the volatility of Ringgit, I agree that the appreciation of MYR against USD will translate to lower revenue, however, do not forget that appreciation of MYR will also lower down the cost of raw materials as well. So no point to over emphasize the FX gain/loss.

I still hold this stock in my portfolio and I will continue to accumulate this stock to lower down the cost. No valuation from me this time. However, Kenanga Research issued their fair value at MYR 1.00 on Jan.16, 2018, whereas I personally consider this fair value was not accurate. I am not to offence or to challenge anyone. In this world of investment, different voices make it more interesting.

https://streetanalystblog.wordpress.com/2018/03/05/bpplas-a-stock-being-oversold/