Stock Review – BPPLAS (5100) (BP PLASTICS HOLDING BHD)

 

Bursa Malaysia - 5100

Bloomberg - BPP:MK

Reuters -  BPPL.KL

Webpage -  http://www.bpplas.com/new/

Yahoo - 5100.kl

Sector            : Industrial Products and Services

Sub Sector    : Packaging Material

Focus             : PE Films and Bag

Company Profile

BP Plastics Holding Bhd (BPPLAS) is a progressive Polyethylene (PE) Films and Bags manufacturer deploying the latest state of the art machinery with advanced multi layer co extrusion technology that is capable to produce high quality primary, secondary and tertiary packaging solutions for various market segment needs. 

BPPLAS had 2 manufacturing plants located in Sri Gading Industrial Estate of Batu Pahat Johor which able to manufacture 8,100 metric tons per month. BPPLAS main focus is in Asia Countries 59.15 % of 2020 revenue followed by Malaysia 28.86 % of 2020 revenue.

71 % of the BPPLAS revenue and 70 % of purchase cost are in foreign currency  predominatory in US Dollar.

Capital Expenditure

BPPLAS had allocated RM 35,600,000 for CAPEX for the year 2021. BPPLAS is investing in a new 9th Cast Stretch Film machine which is expected to complete by the end of 2021.

Closure of factory due to Convid 19

One of the manufacturing plants was closed down by Kementerian Kesihatan Malaysia (KKM) from 19 March 2021 to 28 March 2021 due to 14 foreign workers had tested positive for Convid 19.

Income Statement

	31 Dec 2016	31 Dec 2017	31 Dec 2018	31 Dec 2019	31 Dec 2020
Revenue	324,360,000	328,560,000	333,780,000	331,900,000	316,600,000
Cost of Goods Sales	284,490,000	295,670,000	292,080,000	288,180,000	260,260,000
Earning Before Tax	22,870,000	15,520,000	25,030,000	26,350,000	38,920,000
Nett Profit	17,870,000	12,830,000	21,360,000	21,200,000	29,660,000
5 Years CAGR of Revenue					-0.48 %
5  years CAGR of Nett Profit					10.66 %

Despite the revenue of BPPLAS 5 year CAGR of almost stagnant growth, the nett profit of BPPLAS had growth at rate of 10.66 % over the 5 year. This might be a sign of a cost cost management by the management of the company.

Balance Sheet

	31 Dec 2016	31 Dec 2017	31 Dec 2018	31 Dec 2019	31 Dec 2020
Account Receivable	46,043,257.00	39,779,518.00	37,827,936.00	36,904,107.00	36,393,137.00
Percentage of Account Receivable Past Due	22.49 %	33.92 %	25.29 %	24.82 %	19.85 %
Total Debt	0	0	0	0	0
Current Ratio	2.51	3.31	3.89	4.35	2.90
Cash / Current Asset	27.07 %	29.40 %	35.22 %	30.22 %	40.23 %

BPPPLAS trade receivable past due between the range of  19.85 % in 2020 and 33.2 % in 2017 over the past year. BPPLAS had no debt and a high current ratio. BPPLAS had also high in cash where RM 56,825,992 or 67.60 % of cash is in short term investment at 2.52 %.

Cash Flow

	31 Dec 2016	31 Dec 2017	31 Dec 2018	31 Dec 2019	31 Dec 2020
Cash Flow from Operation	15,580,000	14,070,000	36,950,000	16,780,000	58,770,000
Cash Flow from Investing	-13,890,000	-2,510,000	-24,480,000	-10,740,000	-4,660,000
Cash Flow from Financing	-16,890,000	-11,260,000	-7,510,000	-11,260,000	-15,010,000
Free Cash Flow	-200,000	10,630,000	11,280,000	4,440,000	52,500,000
5 years CAGR of Cash Flow from Operation					30.41 %
4 years CAGR of Free Cash Flow					49.15 %

BPPLAS has positive growth on cash flow from operation and free cash flow of 30.41 % and 49.14 % respectively. In 2020 BPPLAS had increase it cash flow from operation from RM 16,780,000 in 2019 to RM 58,770,000 in 2020 mainly due to increase of trade payable by RM 34,769,197 two times higher than 2019 trade payable.

Per Share Analysis

	31 Dec 2016	31 Dec 2017	31 Dec 2018	31 Dec 2019	31 Dec 2020
Share Outstanding	187,650,000	187,650,000	187,650,000	187,650,000	187,650,000
Price 31 Dec	1.391	1.093	0.984	1.023	1.441
BV/Share	0.88	0.89	0.97	1.02	1.10
P/E	14.61	15.99	8.64	9.05	9.11
5 years CAGR of Price					0.71 %

BPPLAS price only grew by 0.71 % for the 5 year despite its free cash flow increase by 49.15 %. BPPLAS had low P/E ratio currently.

Dividend

	31 Dec 2016	31 Dec 2017	31 Dec 2018	31 Dec 2019	31 Dec 2020
Dividend Per Share	0.08	0.04	0.06	0.06	0.08
Dividend Payout	84.01 %	58.50 %	52.71 %	53.11 %	50.61 %
Dividend Yield	5.75 %	3.66 %	6.10 %	5.87 %	5.55 %
10 year Malaysia Government Bond	4.24 %	3.94 %	4.01 %	3.33 %	2.68 %

BPPLAS had dividend payout policies to distributed at least 40 % of its profit to its shareholder since 2016. BPPLAS had high dividend yield over the past 5 year higher than 10 year Malaysia Government Bond.

Dupoint Analysis

	31 Dec 2016	31 Dec 2017	31 Dec 2018	31 Dec 2019	31 Dec 2020
Net Profit Margin	5.51 %	3.90 %	6.40 %	6.40 %	9.37 %
Asset Turnover	1.34	1.48	1.47	1.40	1.10
Equity Multiplier	1.45	1.33	1.26	1.23	1.40
Return of Equity	10.78 %	7.67 %	11.79 %	11.09 %	14.41 %

BPPLAS net profit margin had increase steady over the five year except in 2017 which the net profit margin is lower due to intense competition and pricing pressure in main exporting market.

Growth Rate

5 year average ROE (AROE)	11.15 %
5 year average dividend payout ratio (ADPR)	59.79 %
Ground Rate (GR = AROE x (1-ADPR))	4 %

GFM had a growth rate of 4 %.

Capital Asset Pricing Model (CAPM)

Beta of BPPLAS	0.56
Risk Free Rate (10 year Malaysia Government Bond)	3.12 %
Expected Return (ROE)	11.00 %
Cost of Equity = Risk Free Rate + Beta (ROE - Risk Free Rate)	7.53 %

Altman Z Score Model

Altman Z Score model is use to predict the chance of business going bankrupt in two years. BPPLAS had a Z score of 5.21 in 2020

Z Score	Zone
< 1.8	Distress Zone (Likely to bankrupt)
1.8 to 3.0	Uncertain Zone
> 3.0	Safe Zone

Research Report

Investment House	Date	Target Price
KENAGA INVESTMENT BANK BERHAD	12 July 2021	RM 2.50
Average Price Target		RM 2.50

Peer Analysis 

	BPPLAS	TGUAN	SLP
P/E	11.00	12.35	16.47
Dividend Yield	4.12	1.79	5.76

BPPLAS is trading at 12% discount from TGUAN P/E and 49 % discount from SLP P/E.

Technical Analysis

BPPLAS daily chart show an upward trend.

BPPLAS weekly trend shows an upward trend with a support level of RM 1.67.

Maximum drawdown for BPPLAS is 59.01 %.

KLSE Personal View

• Convid 19 had increased the world logistic demand hence the demand of PE films and Bag had increased.

• BPPLAS provides PE films and  bag for food and beverage which is essential business hence its manufacturing plant is able to operate during Movement Control Order with compliance of SOP set by the Government of Malaysia.

• Since 71.14 % of BPPLAS revenue are from export, the increasing of container cost over the world after convid 19 might affect the profit of BPPLAS.

• BPPLAS had nett currency exposure of US dollar of - RM 27,538,255, strengthening of USD after March 2021 would decrease the profit of BPPLAS.

• Investment on the new 9th Cash Stretch Film Machine expected to be completed by the end of 2021.

• One of the manufacturing plant had close down for 10 day on March 2021 due to Convid 19 cases. This might affect the production and revenue of BPPLAS.

• BPPLAS had low growth in revenue over the 5 year period however its net profit is growing at 10.66 % which indicated the management had done well in cost management.

• Despite pandemic BPPLAS manage to control its trade receivable past due at 19.85% in 2020.

• BPPLAS has no debt and is cash rich. 67.60 % of the 2020 cash balance is in a short term investment fund earning interest of 2.52 %.

• BPPLAS had increase its trade payable from RM 34,163,325 in 2019 to RM 68,582,231 in 2020 mainly due to increase of their purchase in raw material in 2020. BPPLAS manages to purchase more raw material in 2020 when the raw material price is low. There is less concern on the increase of trade payable because BPPLAS had RM 84,0466,187 in cash and short investment which was able to pay their supplier.

• BPPLAS is trading at 12% discount from TGUAN P/E and 49 % discount from SLP P/E and has a dividend yield higher than 10 years Malaysia Government Bond over the past 5 years.

• BPPLAS current price is at upward trend.

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