PETALING JAYA: A key earnings catalyst for SLP Resources Bhd
is its ongoing development of medical-related components and devices, which command better- than-average margins.
Kenanga Research said the plastic packaging solutions group is now targeting to finalise the development in the second quarter of its financial year ending Dec 31, 2026 (2Q26), a slight delay from the previously targeted 1Q26 timeline.
“On that note, we have also included part of the potential profits into our estimations, being one of the primary drivers for the net profit growth forecast in financial year 2026 (FY26).”
It expects the Japanese market to remain SLP’s largest export market, accounting for more than 40% of its plastic packaging sales.
The research house, which maintained its “outperform” call on the stock, favours SLP for its product mix focusing on high-margin, less commoditised segments such as kangaroo pouches and mono films, as well as robust cash flows and strong balance sheet with a net cash position.
It added that these strengths enable consistent and generous dividend payments, alongside supporting the group’s pipeline of ventures into higher-margin medical device components.
Kenanga Research noted that SLP’s 1Q26 results accounted for 14% of its full-year forecast, but deemed the performance within expectations as it anticipates a stronger year ahead.
On a year-on-year basis, net profit declined 13%, mainly due to weak domestic demand and pricing pressures.
Kenanga Research maintained its target price on the stock at 90 sen, amid expectations that the company will continue to distribute broadly steady dividends, supported by a positive FY26 outlook and a strong net cash position of RM79.5mil.
It added that the company is also reinvesting part of its earnings into strategic assets such as a new mono film machine.
At last look, the stock was trading at 83 sen a share.
Kenanga Research said while demand for SLP’s plastic packaging products in Malaysia is expected to remain challenging due to persistent domestic competition, it anticipates a much stronger 2Q26 on higher selling prices following the surge in resin prices, which would translate into improved profits.
It also cited temporarily higher margins from older inventory purchased at lower prices, as well as increased customer orders amid a shortage of packaging supply since the onset of the Middle East conflict in February, as catalysts for a stronger quarter.
The research house forecasts Brent crude oil prices to average US$80 per barrel this year and US$74 in 2027, noting that prices are unlikely to return to pre-conflict levels even if tensions in the Middle East ease.
“On that note, SLP appears to be able to get sufficient resin supplies from well- diversified sources across the world, underpinned by its strong cash position.”
