With the official opening of Lanxess’s synthetic rubber plant in Singapore, we expect production to commence in 1QFY14, and Goodpack will be able benefit corresponding given the additional IBCs that it had procured earlier. In addition, the plant will only reach full capacity utilization by 2015, so that means Goodpack will be able to enjoy incremental earnings until the plant reaches a steady state of production. With another deal in the pipeline (Asahi Kasei), its prospects look positive in the coming quarters. That said, as its share price fell by as much as 4.4% since our last update, we deem that a buying opportunity has emerged for the stock. Therefore, we are upgrading Goodpack to BUY with an unchanged fair value estimate of S$1.80.
Lanxess opens Butyl rubber plant in Singapore
Lanxess, the world’s biggest manufacturer of synthetic rubber (SR) – and a significant client of Goodpack’s – officially opened its new butyl rubber plant on Jurong Island yesterday. The facility is designed for a capacity of 100K metric tonnes/year, and is the company’s largest investment in five years. Lanxess had chosen Singapore due to its position as a key SR manufacturing site, and its proximity to the emerging Asian markets of China and India, where the company will be able to meet the rising demand for tyres.
Goodpack on track to benefit
Goodpack had already secured contracts with Lanxess back in 2QFY13 but there were originally concerns over a potential delay in production. However, with this official opening, and through enquires with Lanxess, we can expect production to commence in 1QFY14. With the additional intermediate bulk containers (IBCs) that it had procured earlier, Goodpack will be able hit the ground running together with the plant. Furthermore, the plant will only reach full capacity utilization by 2015, so that means Goodpack will be able to enjoy incremental earnings until the plant reaches a steady state of production.
Another plant in the pipeline
Lanxess aside, Goodpack has another deal in the coming quarters with a SR plant by Asahi Kasei. Production at this plant (and use of its IBCs) should come in by 2QFY14, although we await official word on this development.
Recent share correction presents opportunity
Goodpack’s share price fell as much as 4.4% since our last update in the aftermath of its 3Q13 results release. That said, this price correction presents an opportunity for investors to gain exposure to an important player in the IBC market, and indirect beneficiary of the growing middle class in China and India. Upgrade Goodpack to BUY with an unchanged fair value estimate of S$1.80.
Lanxess, the world’s biggest manufacturer of synthetic rubber (SR) – and a significant client of Goodpack’s – officially opened its new butyl rubber plant on Jurong Island yesterday. The facility is designed for a capacity of 100K metric tonnes/year, and is the company’s largest investment in five years. Lanxess had chosen Singapore due to its position as a key SR manufacturing site, and its proximity to the emerging Asian markets of China and India, where the company will be able to meet the rising demand for tyres.
Goodpack on track to benefit
Goodpack had already secured contracts with Lanxess back in 2QFY13 but there were originally concerns over a potential delay in production. However, with this official opening, and through enquires with Lanxess, we can expect production to commence in 1QFY14. With the additional intermediate bulk containers (IBCs) that it had procured earlier, Goodpack will be able hit the ground running together with the plant. Furthermore, the plant will only reach full capacity utilization by 2015, so that means Goodpack will be able to enjoy incremental earnings until the plant reaches a steady state of production.
Another plant in the pipeline
Lanxess aside, Goodpack has another deal in the coming quarters with a SR plant by Asahi Kasei. Production at this plant (and use of its IBCs) should come in by 2QFY14, although we await official word on this development.
Recent share correction presents opportunity
Goodpack’s share price fell as much as 4.4% since our last update in the aftermath of its 3Q13 results release. That said, this price correction presents an opportunity for investors to gain exposure to an important player in the IBC market, and indirect beneficiary of the growing middle class in China and India. Upgrade Goodpack to BUY with an unchanged fair value estimate of S$1.80.
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