Company : Thong Guan Industries Berhad
Business
:
Manufacturing
of various plastics such stretch films, garbage bags, PVC food wraps, courier
bags and compounding. The products are for different industries like the F&B,
Industrial & packaging, Transport & logistic, Consumer packaging,
hygiene & medical, retail & E commerce and waste & energy. I like
the diversification. They are also selling tea & coffee and organic
noodles.
Production
facilities are in Malaysia, Thailand (30%JV) and China (Suzhou) … coming
Myanmar (don’t know when). They are largest exporter of garbage bag to Japan
market (12% share). Total output is more than 150,000 MT per annum. TGuan is
one of the key plastic players. Revenue is just behind Scientex who has 400,000
MT
Fundamental
:
Company
has net cash of RM147 million. Very strong financial position. The 10 years
track record are as follow and you can notice the revenue is increasing over
years and company has a vision to achieve next RM billion revenue. I think the
RM 1 billion target this year is achievable as Q1 result already achieved RM
282 million!
10
years revenue - record
Export
business:
The
split between export and local for plastic is 80% to 20%.
Geographical
Breakdown:
Export
to 70 countries. No information of breakdown in each country.
Quick
comments on 2020 sales performance.
Stretch
film – RM11.1 milion increase (2.6% increase)
Courier
bag – RM12.9 million increase (26.9% increase!!)
F&B
– RM14.3 million increase (22.8%)
A significant increase on the courier bag business which is a boom sector and glad that company is capturing this opportunity. Well done! The courier bag is for E commerce customer in USA. PVC Food wrap business was hit by pandemic but will recover soon. Garbage bag sales is slow in Japan.
Q1
Result:
Major plastic products sales are improving except PVC food wraps.
Prospect:
Existing
capacity of the plastic division:
|
Category |
Stretch Films |
Industrial Film/bags |
Garbage Bags |
PVC Food wrap |
Courier Bags |
|
Existing machines |
10 Conventional 5th Nano |
3 Co-ex blow films |
200 blow films |
12 lines |
? |
|
Capacity |
100,000 MT |
? |
33,000 MT |
14,000 MT |
7,200 MT |
|
Immediate Expansion |
6th Nano line (Total 5 more) |
4th blow film |
? |
(10 lines by
2022) |
14,400 MT by 2021 |
|
Contribution |
45% |
16% |
16% |
5% |
6% |
Seem
not much affected by the rising resin price. They have no problem passing the
resin price hike to customers according to the director. Volume is a key
advantage against the rest of competitors for better bulk price discount.
Growth
opportunity:
Below
is the next key phase of growth. It seems there is vision to achieve the next RM
billion. Very interesting expansion plan.
You
can watch the chat with the director via link below.
https://www.youtube.com/watch?v=U3LSme3RmQQ&t=3767s
My
view on share price:
Forecast
earning & PE.
In
terms of earning, a quick estimate as below:
|
Q1 |
Q2 |
Q3 |
Q4 |
Total |
|
5.71 |
5.5 |
5.5 |
5.5 |
22.21 |
Estimate
full year PE is 11.53 at RM2.56 (22/7/2022). There is some room to appreciate
if valuation is at PE 12.35 which will be RM2.74. Let’s wait and see. Scale of
production will be a game changer and possible another Scientex company in the
making. Set back is low dividen yield but that’s OK, you need time to grow Musang
King or Black Thorn!
Note: Updates will be in FB page (mandarin version) below:
https://www.facebook.com/股海捞真-102714428734096
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