PPHB - A Mega Surprise Package

As of recent, the robust economy outlook in Malaysia had been seeing packaging industry receiving some attention from the eyes of the investor. The domestic and Asian markets are expected to contribute substantially to the revenues of plastic and paper packaging, as well as industry product makers.

While quite a number of the packaging companies like Orna, Muda, Master and SCGM had been seeing strong growth and strong uptrend in their share prices, it had caught my interest in PPHB, a well to do packaging company that had yet to unveil it's true value.

Below is the latest share price for Master, Muda, Orna and SCGM.

While all the above 4 had been showing strong uptrend signs or signs of breaking up further, PPHB had been relatively not on the hot target of the public for the time being. Let's have a quick look at PPHB latest share price movement.

PPHB (Public Packaging Holding Berhad) had been consolidating at the range of RM 0.70 to RM 0.75 for around 6 months period. However, the recent break through above RM 0.75 would suggest that PPHB will be armed forward to a higher challenge ahead after seeing more convincing volume and participation in the counter. PPHB will be looking to challenge above RM 0.80 in the coming days after a series of consolidation.


PPHB - A Rising Star

PPHB primarily involved in the manufacturing and retailing of corrugated cartons, packing materials, gift and display box, and trading of paper products. The robust economy outlook in the local and Asian market had been a promising sign for the packaging industry to see a bullish run. As of the 1st Quarter for FYE 2014, PPHB had recorded an astounding result with 3.31 cents EPS.

The packaging industry outlook for 2014 will be a growing trend, hence will be looking for a growing profit in most of the company. The economy will continue to remain bullish until next year as manufacturer continue to push more sales and production. 2015 will be the year where the implementation of GST will come into picture.

Managing Director Micheal Koay will be targeting the group to see a growth of at least 10% after the group had invested around RM 6 million into new digital printing machines to increase the production capacity. Micheal Koay will also be looking into untapped sector like the services, finance and telecommunication sector to boost the company revenue.

Should we assume that PPHB is able to deliver an average of 3 cents per quarter for the next 3 quarters of FYE 2014, we will be looking for a total of 12 cents EPS for the year ending of 2014.
Shall PPHB be traded at a skeptical PER of x8, PPHB will be easily be value at RM 0.96. The current NTA of RM 1.34 is also resembling a huge discount of approx 41% on it's current price of RM 0.78.


PPHB - A Diversified Package

As of late, PPHB had been eying for a diversification towards hospitality and property sector after seeing a hot demand in the Penang tourism sector. PPHB had in plan to develop a boutique hotel in Penang, dubbed "The Quay" at Pengkalan Weld, Penang.

The Quay will consist of a five storey boutique hotel (approx 18000 sq meter in built up) and retail lots (approx 950 sq meter built up) will see more than 160 guestrooms together with a 2 storey carpark that will be able to host more than 100 car park spaces.

Boutique hotel in Penang had a good track record of good occupancy rate. An occupancy rate of 85% for "The Quay" at an average price of RM160 per night will be drawing approximately RM 0.6 million per month, and an estimation of RM 7.5m in a year, which can contribute a good cash flow for the company. This had not include the commercial leasing income that might be looking to contribute another RM 2m to RM 3m into the whole project.


PPHB will be a good vehicle to be invested in at the current price. We continue to believe in Micheal Koay in delivering better result to the company and guiding the company towards greater heights in the coming days.

PPHB will be a great investment due to:
- Current price of RM 0.78 which is 41% discount towards it's NTA of RM 1.34
- A strong growing trend in the Packaging Industry in Malaysia
- PPHB to see growth of at least 10% in 2014 which new machinery to boost more production
- Leveraging on the strong tourism in Penang and diversify into hospitality industry in Penang
- A forward earning projection of 12 cents EPS, trading at PER x8 will value PPHB at RM 0.96 (18.75% upside)

PPHB will be looking to challenge above RM 0.80 in the coming days. A short term outlook will position PPHB in touching RM 0.85, while a longer term outlook will suggest PPHB to be trading above RM 1.00 should be earning show a larger surprise.

Bone's short term TP: RM 0.85

Cheers and have a nice day