This article first appeared in The Edge Malaysia Weekly on August 5, 2024 - August 11, 2024

Investors who bet on Master-Pack Group Bhd (KL:MASTER) triumphing over the woes wrought by the Covid-19 pandemic, geopolitical uncertainties and an environment of high inflation and high interest rates would have been well rewarded for their faith in the company.

The corrugated carton player’s efforts brought it a net profit of RM14.5 million for the financial year ended Dec 31, 2021 (FY2021), 28.3% higher than the RM11.3 million it made in FY2020. Net earnings then leapt to RM21.8 million in FY2022 before climbing further to RM24.6 million in FY2023. This means the group’s net profit grew at a compound annual growth rate (adjusted based on awards methodology) of 29.7% over the last three years, as revenue strengthened year to year.

Thanks to its steady earnings growth, Master-Pack recorded a weighted return on equity of 15.1% over the same period, while it rewarded shareholders with dividend payouts for each of those years, at four sen per share in FY2021, which jumped to 10 sen in FY2022 and further to 12 sen in FY2023.

Amid this, the group’s share, which had been hovering at the RM1.55 (adjusted) level at end-March 2021, rallied to RM2.598 by end-March 2023, and further to RM3.62 by March 31 this year — the cut-off date for The Edge Malaysia Centurion Club Corporate Awards 2024 — for a 26.14% return to shareholders (adjusted based on awards methodology) over the three-year period. The peer-topping rate earned the group the award for Highest Returns to Shareholders Over Three Years under the industrial products and services sector.

Recalling some of the tough decisions the group had to make in earlier days for a better financial outcome, its executive chairman Datuk Seri Syed Mohamad Syed Murtaza once shared in the group’s Annual Report 2022: “I still remember the dire straits the group was in at that time [when I took over stewardship of this group of companies in 2004] and had to make the harsh decision to lay off workers and close down the underperforming marine operations.

“[Today, we have] put in place the mechanics of running an efficient and productive facility with the support of a loyal and faithful team of personnel to oversee the operations, plus a strong financial foundation.”

Over the last 30 years, Master-Pack — which is primarily in the business of manufacturing corrugated cartons, wooden packaging and providing one-stop packaging solutions to its customers — had made a name for itself as an innovative niche market player in the packaging industry.

Locally, the group has packaging plants in Nibong Tebal and Sungai Baong, both inPenang, and Kuching, Sarawak. In 2018, the group established Master-Pack Vietnam Co Ltd to venture into the province of Long An, Vietnam to manufacture wooden pallets and packaging to serve that market.

The group’s FY2023 turnover came from numerous industries; the top five being solar energy (63%), food-beverage and agro-based (15%), electronics and electrical, converter, and ceramics.

In its Annual Report 2023 released in April this year, Master-Pack said: “The group will continue to expand its customer base to improve diversification and reduce dependency on any particular sector of customers. Efforts to diversify revenue streams will continue, although the solar sector is expected to maintain its dominance due to the global expansion of the solar industry.

“With solar power widely recognised as the most cost-effective method of electricity generation and the increasing emphasis on green energy initiatives worldwide, higher deliveries to our solar sector customers are expected in the year 2024,” it added.

For the first quarter ended March 31, 2024 (1QFY2024), Master-Pack posted a net profit of RM7.2 million, up 45% from the RM4.95 million it made during the same quarter last year, as revenue grew from RM40.8 million to RM42 million. The group said although deliveries to the solar sector experienced a decline of RM1.5 million due to the maintenance activity of a major customer and a cost reduction exercise offered to customers, which resulted in lower selling prices to the solar sector, the group’s profit before tax rose by RM800,000, thanks to prudent management of material purchasing and operational costs.

Looking ahead, Master-Pack is cautiously optimistic about its growth prospects.

“The group will strive to sustain its incremental growth for this financial year on the back of improved productivity and efficiency on the production floor and expected uptake in deliveries to the electronics and electrical sector for this year,” said Master-Pack in its 1QFY2024 results filing. “However, the regional economic outlook for the rest of this year remains uncertain. As a packaging provider, our business is thus impacted by the fluctuations in the global supply chain movement.”

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