NTPM’s full year performance met 99% of our revenue estimates, but
missed our earnings estimates meeting only 79%, impacted by higher
overhead costs from the increase in electricity and natural gas tariffs.
YTD revenue grew 6.9% YoY to RM541.4m while YTD earnings increased 9.7%
YoY to RM53.9m. We are maintaining our Outperform call with an
unchanged TP of RM1.04, supported by its i) 55% Malaysian tissue market
share position, ii) emergence as a promising diaper and personal care
manufacturer, iii) regional expansion of operations into Indochina, and
iv) earnings boost from capacity and higher margins through product
diversification. A single-tier final dividend of 1.45sen was declared,
in line with our full year DPS estimate of 2.9 sen.
Paper products. Revenue YTD recorded RM380.6m (+2.3% YTD YoY, -7.9% QoQ), supported by higher demand for tissue products in the export market. QoQ revenue and PBT were lower, affected by lower sales and higher overhead cost attributed to the recent increase in electricity tariffs.
Personal care products. Registered higher revenue of RM160.8m (+19.3% YTD YoY, +30.4% QoQ) attributed to the increase in sales of baby diapers, highlighting the potential growth of baby diaper products for NTPM.
Cautious outlook. Despite some promising growth expected from its expansion plans, management is cautious as the industry faces rising cost pressures coupled with intensified competition. Its tissue and personal care segments are competing against fast-moving-consumer goods (FMCG) conglomerates, who continue to shift their focus to increasing volumes rather than protecting margins.
Rising overheads. NTPM will face ongoing fluctuations in overhead costs which dampens the Group’s profitability. 4Q14, showed the impact of the rise in electricity and natural gas tariffs which has escalated costs. With this in mind, we are adjusting our costs higher by 5% going forward. This in no way lessens the attractiveness of the stock, as we expect future earnings to be boosted further upon the materialising of their current and new growth strategies. Our earnings estimates are largely unchanged however, the higher costs being mitigated by slightly lower effective tax rates.
Maintaining Outperform. Our valuation of RM1.04 at 16x PE multiple based on FY15F earnings only considers a 8% growth in revenue with a 12% net margin sustained by higher margins expected from baby diapers and new products which we maintain is conservative as we have not taken into account the potential production of wrapping tissue for export.
Source: PublicInvest Research - 23 Jun 2014
Paper products. Revenue YTD recorded RM380.6m (+2.3% YTD YoY, -7.9% QoQ), supported by higher demand for tissue products in the export market. QoQ revenue and PBT were lower, affected by lower sales and higher overhead cost attributed to the recent increase in electricity tariffs.
Personal care products. Registered higher revenue of RM160.8m (+19.3% YTD YoY, +30.4% QoQ) attributed to the increase in sales of baby diapers, highlighting the potential growth of baby diaper products for NTPM.
Cautious outlook. Despite some promising growth expected from its expansion plans, management is cautious as the industry faces rising cost pressures coupled with intensified competition. Its tissue and personal care segments are competing against fast-moving-consumer goods (FMCG) conglomerates, who continue to shift their focus to increasing volumes rather than protecting margins.
Rising overheads. NTPM will face ongoing fluctuations in overhead costs which dampens the Group’s profitability. 4Q14, showed the impact of the rise in electricity and natural gas tariffs which has escalated costs. With this in mind, we are adjusting our costs higher by 5% going forward. This in no way lessens the attractiveness of the stock, as we expect future earnings to be boosted further upon the materialising of their current and new growth strategies. Our earnings estimates are largely unchanged however, the higher costs being mitigated by slightly lower effective tax rates.
Maintaining Outperform. Our valuation of RM1.04 at 16x PE multiple based on FY15F earnings only considers a 8% growth in revenue with a 12% net margin sustained by higher margins expected from baby diapers and new products which we maintain is conservative as we have not taken into account the potential production of wrapping tissue for export.
Source: PublicInvest Research - 23 Jun 2014
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