PETALING JAYA: Resin felt manufacturer Oceancash Pacific Bhd’s (OCP) new non-woven product capacity, which is expected to be completed by early 2022, has raised analysts’ predictions of its earnings.
In a note to clients, research house CGS-CIMB said it has raised the group’s financial year 2022 (FY22) earnings per share (EPS) forecast by 59.7% on expectations that a higher production capacity will boost the company’s income.
“We have also raised our FY21 EPS by 37.3% as we expect OCP’s felt insulation production to be ramped up in FY21 post-the expected commissioning of its Thailand facility in the first quarter of this year.”
Earlier this week, OCP announced that it had entered into a conditional subscription agreement with Macquarie Bank Ltd for a proposed allotment and issuance of up to 24.5 million new ordinary shares, or 10% of the current total number of issued shares.
The placement shares will be issued at a price equivalent to a 10% discount to the five-day volume weighted average market price immediately before the date Macquarie sends a subscription notice to OCP.
Assuming full subscription of the placement shares at an illustrative price of RM0.87 per share, the group expects to raise RM21.2mil, which will be used to increase machinery and production capacity, CGS-CIMB noted.
“We retain our share base assumptions pending the completion of this exercise, “ the research outfit said.
Following the upward adjustments to its FY21-FY22 earnings forecasts, CGS-CIMB has upgraded its call on OCP to a “hold” from “reduce”.
Consequently, the target price for the stock has also been raised to 79 sen from 48 sen.
“Key downside risks are a sharp drop in orders for its hygiene segment and a delay in the relocation of one of its felt production lines to Thailand due to the Covid-19 outbreak.
“Upside risks include better-than-expected order recovery for both its hygiene and insulation segments, and better overall margins.”
At the close, OCP shares ended at 83 sen per share, up 7.5 sen, valuing the entire company at some RM204mil.
For FY19 ended Dec 31, the company made a net profit of RM7.11mil on a revenue of RM89.3mil.
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