PETALING JAYA: BP Plastics Holding Bhd is looking for a 10% sales volume growth for the financial year 2024 (FY24), driven largely by export sales of premium products such as thinner gauge nano stretch film.
In a post-results engagement with its management, Kenanga Research said the manufacturer of plastic products expects higher orders from existing customers, the onboarding of new customers and higher export sales of innovative premium offerings such as nano stretch film to Europe and the United States.
“It is putting onto the market its new stretch hood product, commonly used for securing palletised items like cement and resins for outdoor storage, as the product has met quality and safety tests. The key selling points of the product is recyclability and durability,” said the research house. BP Plastics is also putting onto the market a new blown film packaging product used in the food and beverage sector in the fourth quarter of 2024.
According to Kenanga, the company plans to market the product directly to domestic brand owners as this blown film product offers greater flexibility in terms of customisation (versus stretch film) backed by state-of-the-art printing and cutting machines.
The higher-margin value-added product should help to cushion higher labour and electricity costs.
“We also keep our target price of RM1.42 based on 10 times FY25 price-to-earnings ratio (PER) at a discount to the sector’s average historical forward PER of 13 times, largely to reflect BP Plastics’ relatively smaller market capitalisation and thinner share liquidity.
Elaborating on its investment case, the research house said it liked the stock for its strong foothold in the South-East Asia market which is expected to remain resilient despite global economic uncertainties. It also noted that the group’s expansion plans are backed by a strong balance sheet being in a net cash position.
“However, its valuations are fair after the recent run-up in its share price,” it added.
