INVESTMENT HIGHLIGHTS

• Commendable progress in Myanmar

• MNC contracts to prime growth in FY18

• Exports sales to drive expansion

• Maintain BUY and TP of RM2.51 per share

Commendable progress in Myanmar. Management has updated on the progress in Myanmar, which seems to be going well since their takeover in July. Among others, Daibochi Packaging Myanmar (DPM) has obtained the ISO 9001:2015 accreditation and Hazard Analysis and Critical Control Point Food Safety Management System certifications, which will open up doors to bigger customers. The sales team there has been approaching MNC customers based in Myanmar for new sales. On top of that, Daibochi Malaysia has also approached its price-sensitive customers for potential orders with DPM’s new offering. As the development of Myanmar is on track, we expect for Daibochi to start its tax-free commercial period starting FY18.

MNC contracts to prime growth in FY18. The company is close to securing new contracts from the Australia and New Zealand (ANZ) market, which could be valued at RM28m for a year. If all goes well, we expect the new contracts to start contribution in the first half of FY18. We are positive on the progress as MNC customers from the ANZ region are known to set high standards for manufacturing processes and quality products. We anticipate that its topline will grow by +9.6%yoy in FY18.

Exports sales to drive expansion. As of 3QFY17, export sales make up 54.4% compared to 45.6% for domestic sales. We expect exports to dominate sales growth based on the pipeline of new contracts from overseas customers as well as its strategy to push sales from its price sensitive customers through its low-cost production at DPM.

Earnings forecast unchanged. The information that we gather from the briefing has been factored in into our earnings forecast previously.

Maintain BUY with TP of RM2.51. Our TP is based on the dividend discount model with a terminal growth rate of 3.2%.

Source: MIDF Research - 22 Nov 2017