We believe FY15 will be an exciting year for NTPM  as its Vietnam plant will be fully operational. In view of the additional production capacity of tissue and baby diapers, we raise our earnings by 1-5%. We continue to like the stock given its growing regional expansion and favourable raw material cost. Maintain BUY, with a new MYR0.73 FV (from MYR0.69).

- Vietnam  plant  coming  onstream.  The  construction  of  NTPM’s  new plant in Vietnam will be completed by March 2014, with machinery being installed  by  June  2014.  The  plant,  which  is  set  to  commence  operation by  Sept  2014,  will  produce  30  tonnes  of  tissue  a  day,  thereby  boosting the  group’s  total  production  capacity  to  345  tonne/day  from  315 tonne/day.  Due  to  the  high  initial  investment  and  start-up  costs,  we expect  earnings  contribution  from  the  Vietnam  operations  to  be
negligible in the near term. The new plant in Vietnam is part of NTPM’s long-term  plan  to  target  the  Indochina  markets,  riding on Vietnam’s cheaper labour costs and pulp prices to expand its production capacity.

- Adding  baby  diaper  production  capacity.  NTPM  currently  has  two machines  producing  tape-type  baby  diapers  and  another  making  baby pull-up pants diapers at its Penang plant. With the former two running at full  capacity,  driven  by  robust  sales  growth  of  baby  diapers,  NTPM  will add  another  line  of  tape-type  diapers  at  the  plant  by  year-end  to  boost production capacity.

- Eyeing  Thailand.  In  order  to  widen  its  regional  footprint,  the  group  is also  actively  seeking  opportunities  to  penetrate  the  Thailand  market. NTPM is looking to set up a converting plant in Thailand to cater for the original equipment manufacturer (OEM) business as a start. It also plans to  set  up  new  plants  in  Hanoi,  Vietnam  and  Myanmar  to  tap  on  the potential  demand  in  these  emerging  markets  which  have  seen  rising population and income growth.

- Maintain BUY. We tweak our FY14 and FY15 numbers upwards by 1% and 5% respectively, on the back of higher revenue from NTPM’s paper and baby diapers capacity expansion. Maintain BUY, with a higher FV of MYR0.73  (from  MYR0.69),  as  we  roll  over  our  valuation  to  13x  FY15 EPS.

Source: RHB