Goodpack Ltd

OCBC on 14 Aug 2012

Goodpack’s FY12 results saw an overall 11.7% YoY growth in revenue to US$177.2m on the back of higher demand from the Synthetic Rubber segment while PATMI climbed higher by 4.6% YoY to US$45.2m. Its results were in line with our projections, coming in within 2.5% and 2.4% of our top and bottom-line forecasts respectively. To round off a stellar year, management declared a final dividend of 2 S cents and a special cash dividend of 3 S cents (FY11: final and special cash dividend of 2 S cents and 1 S cent respectively). Entering FY13, we forecast a 10% increase in revenue on the back of sustained growth in the Synthetic Rubber segment as well as increasing penetration in the automotive space. While margin pressures from higher logistic costs and IBC leasing charges will remain, we still anticipate overall bottom-line growth for the company. Rolling our projections forward to FY13/14, our fair value estimate rises from S$1.70 to S$1.85. Maintain HOLD.

FY12 results in line
Goodpack’s FY12 results saw an overall 11.7% YoY growth in revenue to US$177.2m while PATMI climbed higher by 4.6% YoY to US$45.2m, which came in within 2.5% and 2.4% of our top and bottom-line forecasts respectively. Strong growth from the Synthetic Rubber segment – 11% YoY to US$94.7 – boosted its top-line while cost saving initiatives via headcount reductions in its sales division helped to cushion the corresponding increases in logistic and handling costs. To round off a stellar year, management declared a final dividend of 2 S cents and a special cash dividend of 3 S cents (FY11: final and special cash dividend of 2 S cents and 1 S cent respectively).

Strong growth to continue
Entering FY13, management expects revenue growth to persist on its strong growth tract on the back of increasing market share in the Synthetic Rubber (SR) segment and the procurement of additional contracts in the automotive space. With the opening of more SR plants in Singapore (two by the end of the year) and given general stability in the automotive industry, we deem a 10% increase in revenue for FY13/14 to be reasonable and raise our projections accordingly (previously 8%).

Although margins may remain depressed
While Goodpack’s cost savings initiatives had yielded some improvements, its logistic and handling costs remained higher on a YoY basis (+14% YoY to US$68.4m). Coupled with the increase in IBC leasing expenses, operating and EBITDA margins came in lower by 1 ppt and 2.2ppt respectively to 33.8% and 43% respectively. With a significant pickup in IBC demand likely to come in 2H13, we could see operating and EBITDA margins remaining depressed on the back of higher leasing costs. Furthermore, any moves by Goodpack to switch to a more cost efficient global logistic handler will take time to assimilate and adjust and cost savings may not be apparent in the near-term. Nonetheless, our FY13 PATMI still calls for a 2.2% YoY increase.

Maintain HOLD at higher FV
As we roll forward our projections to FY13/14, our DCF-derived fair value increases to S$1.85 from S$1.70 previously. Maintain HOLD.