BPPlas - 2 June 2021

Company : BPPlas Berhad

Business :

Manufacturing PE stretch film in Batu Pahat Johor. The profit margin for plastic is usually single digit (except SLP, SCGM). This business is largely depending on raw material (resin) cost. Stretch film usually use LLDPE (liner low density Polyethylene) as raw material.

Side note:

The local supplier for PE (including HDPE, LDPE & LLDPE) is Lotte Titan Chemical based in Pasir Gudang (another public listed company in Malaysia). More information of usage of PE can be found via link below:

https://www.lottechem.my/products/productGuide_view.asp

Fundamental :

Net cash company and consistently giving out dividen every quarter. It is perfect choice for those who seek high dividen yield and consistent dividen payment. The company has increased their cash to RM84 million (2020) compared to RM45 million in 2019. Well done management and board of directors!

 

5 years revenue is pretty flat or consistence. See below.

 

Export is 70% of their business which can benefit from high USD/RM exchange rate.

Recently BPPlas has released their Q1 result and performance is very encouraging. In fact one of the highest revenues and net profits. Profit margin also increase to 9.7%! See chart below.

BPPlas - Q1 Result

 

I include other plastic companies latest QR results for comparison purpose except Scientex (they have property business).

 

SLP - Q1 Result

 

Thong Guan Q1 Result

 

SCGM Q3 Result

 

Daibochi - Q2 result

 

Prospect:

Resin price is the key factor for profitability. If they can pass the cost to end users/customers then profit should be good. The e-commerce logistic is a booming sector. Hopefully they can capture this opportunity. Growth wise is not very aggressive but they will invest in new machine. This will only contribute to the earning in 2022 as installation and commissioning will long time (typically 1.5 years).

 

Company will invest in new machine. Good sign.

 

Raw material / Resin price:

The resin price shot up in Mar and then slowly soften in May (see resin chart below). Coming Q2 result will be lower profit as I don’t expect the company can pass on the resin cost so quickly. Long term prospect is considered OK as still lower than average of 9200 in 2018 (see resin chart below).

 

 

My view on share price:

This company is a bit like old man (ah Pek) company. Website show very little information on their product usage. The price can stagnant for a long period of time. If you look at the price chart, share price can hibernate (price flat) for whole year 2019 and again 4 months in 2021 except the recovery from Covid sell down in Mar 2020.

 

 

Simple 2021 EPS forecast will be 5x3 + 4 = 19 cent. At price of RM1.60, the PE will be 8.42 which is low when compared to others but it is always hovering around 8-9 most of the time. I don’t think it will increase to PE 15 as lack of institution coverage or “goreng”. Factor in a small growth, it is possible to appreciate until RM1.80 based on PE 9.5. However, the peak price was around RM1.73 and seems hard to break RM1.80.   

I do not expect the share price to fly in coming months (old already!) but company is stable in giving dividen. Suitable for low risk appetite investors. See note below.

At time of writing, I own few BPPlas shares…support old man a bit lah, better than bank FD rate! 😊