INVESTMENT HIGHLIGHTS

• One of the biggest tin can and OEM creamer manufacturers in Malaysia

• To expand food division output by 40% to 50% by FY19

• Appealing valuation

• Initiate with BUY and TP of RM3.46

Business Overview:

Tracing its roots back to 1957, Can-One Bhd (Can-One) manufactures tin cans, jerry cans, sweetened condensed milk (SCM) and evaporated milk. Its manufacturing facilities are located in Butterworth, Penang; Teluk Panglima Garang, Selangor; Pasir Gudang, Johor as well as Batam, Surabaya and Jakarta in Indonesia.

Investment Theses:

1. One of the biggest tin can and OEM creamer manufacturers in Malaysia. Can-One is one of the top three tin can makers in Malaysia with an estimated market share of 30%- 35%. Its tin cans and jerry cans are mainly used in the edible oil industry. It is also a sizeable OEM SCM and evaporated milk manufacturer, with an annual production capacity of about 180,000 tonnes combined.

2. To expand food division output by 40% to 50% before FY19. We expect Can-One’s revenue to hit RM1bil this year but we believe it will chart higher growth in the next two years. The management has earmarked about RM150m in the next three years to further increase its food production.

3. Improving balance sheet. Can-One was once highly-leveraged with gearing breaching 1x. Over the years, it reduces its gearing to 0.64x in FY16, thanks to stronger operating cashflow that has improved from RM15.7m in FY14 to RM134.0m in FY16.

4. Appealing valuation. Can-One’s share price has fallen by about 16% from its one-year average of RM3.26, which we think can be attributed largely to its weaker first half results as well as a former substantial shareholder pared down stake. We expect a brighter outlook for the company due to stabilizing raw material costs and expansion plans. It is also trading at 30% discount to its NTA.

Initiate with BUY and TP of RM3.46. Our TP of RM3.46 is based on 8x FY18F EPS of 43.22 sen. The 8x PER is based on its two-year average PE band. We like the company for its attractive valuation, long term prospects and earnings resilience due to the consumer staple industry that it serves.

Source: MIDF Research - 27 Nov 2017