KUALA LUMPUR, Jan 7 (Bernama) -- Bursa Malaysia’s benchmark index rebounded from earlier losses to close at its intraday high on Wednesday, gaining 0.27 per cent in late trading as buying interest returned to selected heavyweights. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) advanced 4.48 points to 1,676.83 from Tuesday’s close of 1,672.35. The benchmark index opened 0.88 of-a-point lower at 1,671.47 and subsequently hit a low of 1,665.94 during the mid-morning session before gaining momentum toward closing. On the broader market, losers led gainers by 565 to 512, while some 526 counters were unchanged, 1,046 untraded, and 10 suspended. Turnover improved to 2.73 billion units worth RM2.76 billion versus Tuesday’s 2.66 billion units worth RM2.76 billion. Dealers said that investors were cautious following geopolitical developments in Asia.
Remain neutral with unchanged target price (TP) of RM0.88
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| NTPM Holdings Bhd |
NTPM’s 1QFY17 revenue came in at RM151.4m (+5.6% YoY, +4.7% QoQ), while net profit slipped to RM9.4m (-27.4% YoY, -6.6% QoQ). The higher revenue was driven by increase in sales of tissue products, meeting 21% of our revenue forecast for FY17F. The lower net profit which only met 13% of our FY17F net profit forecast awas attributed to higher losses incurred in the post commencement of Vietnam's initial tissue operations and thus margin deterioration was recorded owing to higher energy and labour costs. While Vietnam’s operations have hampered the Group’s performance this quarter, we do expect its contributions to be more visible in the medium term and to breakeven by FY18. We continue to maintain our Neutral view with a TP of RM0.88 pegged to a 14x PE multiple on FY17F EPS of 6.3sen.
Paper products segment saw improvements in revenue by 8.9% YoY to RM105.4m (+4.6% QoQ). PBT however declined 20.6% to RM10.8m mainly from higher losses incurred in the post commencement of Vietnam’s tissue operations. This has also translated to margin deterioration from higher energy and labour costs. We understand this to be the initial gestation period at start-up stages, and expect to see breakeven by FY18.
Personal care products. 1QFY17 revenue fell marginally by 1.3% to RM46.0m, while PBT dipped 23.4% to RM3.2m attributed to the increase in labour costs, depreciation and advertisement and promotional activities from the competitive nature of some personal care products.
Outlook. NTPM continues to be challenged by a weaker broad market, hence affecting the spending ability of consumers. Aside from external factors, the Group is also faced with the following issues for FY17 i) Full impact of higher electricity and natural gas tariffs effective 1 January 2016 by about 4.6% and 17.2% respectively, ii) increasing cost from the rise in minimum wage for employees in Peninsular Malaysia by 10% to RM1000/mth, and in East Malaysia by 15% to RM920/mth commencing 1 July 2016, iii) foreign currency fluctuations, with high volatility posing a challenge to managing manufacturing costs, and iv) Malaysia’s consumer sentiment is expected to remain subdued from inflationary pressures affecting buying power.
Remain Neutral. We continue to recommend NTPM with a unchanged TP of RM0.88 pegged to a 14x PE on FY17F EPS of 6.3sen. The Group has strategic plans and control measures to mitigate the impact of the above adverse challenges and is expected to enhance its performance going forward.
Source: PublicInvest Research - 26 September 2016
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