NTPM Holdings Bhd (+ve)

SHARES of tissue and personal care products manufacturer NTPM (Fundamental: 1.1/3, Valuation: 1.1/3) have seen active trading since last Thursday. Since then, its share price has climbed 10.4% to 79.5 sen over just four days. 

NTPM commands more than 55% share of Malaysia’s tissue market and is best known for its popular Premier and Royal Gold brands. The Penang-based company also expanded into producing paper-related personal care products such as sanitary products, baby and adult diapers, and cotton products.

Nonetheless, tissue paper products remain its main revenue generator, contributing 70% of revenue and 83% of its operating income in FYApr15. Geographically, NTPM derived 76% of its sales from the domestic market, 13% from Singapore, and 11% from other export markets in FY14. 

For FY15, revenue increased marginally by 1% to RM547.5 million while net profit declined 21% to RM42.6 million, owing to higher material costs, production costs, interest expenses and a forex loss of RM3.0 million.  USD-denominated borrowings accounted 30% of its total borrowings.

As at end-April 2015, gearing stood at 43%, up from 26% a year ago. This is probably attributed to its capex of RM93.1 million: some RM72 million allocated for paper segment and RM21 million for personal care segment. 

Management has embarked on strategic cost management initiatives to contain rising overhead costs and improve operational efficiencies. Moving forward, NTPM targets Indo-China as its next growth driver and set up a USD20 million manufacturing plant in Vietnam last year.

In April, the company paid an interim dividend of 0.73 sen for FY15 but does not intend to recommend a final dividend. This translates into a dividend of 0.73 sen per share for FY15, down from 2.9 sen in FY14.

The stock currently trades at premium valuations, at a trailing 12-month P/E of 20.3 times and 2.4 times book.

This article first appeared in digitaledge Daily, on August 12, 2015.