PETALING JAYA: Mercury Securities Sdn Bhd has started coverage on L&P Global Bhd
, a provider of industrial packaging solutions, citing the company’s prospects for expansion and diversification as well as its technical capabilities.
According to the research house, L&P Global is in a favourable position to capitalise on the expansion of the wooden industrial packaging sector.
The growth is primarily attributed to the growing preference for wood over plastics as a material for industrial packaging solutions.
Mercury noted L&P Global is expanding its circular logistics business, by extending logistics services to its existing customers and by venturing into the collection of used industrial packaging products to be reused and recycled at the company’s Sungai Bakap factory.
“This value-added service will improve the company’s bottom-line margins going forward,” Mercury said in a report on L&P Global.
In 2023, the company intends to expand its sales in the solar energy, pharmaceutical and circular supply projects which will increase the utilisation rate in the box and crate, engineered wood pallet, as well as the recycle pallet business.
L&P Global plans to expand its sales in the semiconductor equipment manufacturer, coupled with solar energy projects based on customer’s capacity increase next year, it added.
The company is also planning to strengthen its presence in the northern and southern regions of Malaysia.
In the northern region, the company will relocate some of its assembly activities for boxes and crates to the Perai and Kulim plant.
It also plans to install new assembly lines, and expand its manufacturing capacity in the Sungai Bakap factory in Penang.
The Perai plant will commence mass production by the second quarter of 2023 (2Q23) while the Kulim plant is expected to be ready by 1Q24.
For the southern region, L&P Global plans to construct a new factory in Johor to produce boxes and crates, provide packing services, support circular supply services and expand into Singapore.
Construction of the factory is expected to begin by 2Q24 and completed by 3Q25.
The company is also looking for a 12,000 sq ft factory lot in the Klang Valley to set up an assembly and storage plant, allowing for further expansion into the domestic market.
Mercury Securities said L&P Global has a strong customer base, having a fleet of around 300 customers with 55% are multinational corporations (MNCs).
In terms of revenue, 97% of the group’s revenue is contributed by the MNCs.
“The company also plans to attract and obtain more new customers from various industries which will aid its diversification plans and reduce its concentration risk on the renewable energy industry,” the brokerage said, adding L&P Global has a 5.05% market share by business value in Malaysia.
It has a “buy” recommendation on the stock with a target price of 63 sen per share based on estimated financial year 2023 earnings per share of 3.3 sen, valued at price to earnings multiple of 19 times.
L&P Global was last traded at 51 sen per share.
