Tomypak may see 52% capacity increase by FY19E, says Maybank IB


KUALA LUMPUR: Maybank Investment Bank Research has initiated coverage on Tomypak Holdings with a Buy call and target price of RM1.05 based on a FY18 PER of 16.5x.

The company is in expansion mode with a prospect of a 52% increase in capacity by FY19E, said the research firm.

"We forecast earnings to grow at a healthy 17.6% 3-year CAGR (FY16-FY19E). Valuations do not fully reflect this growth potential, in our view," it said in its research note.

"We believe Tomypak has embarked on a new phase of growth after the successful commissioning of its Senai plant in 2Q17 with a capacity of 6,000 mtpa. The expansion along with continuous quality improvement will provide the Group with the much-needed impetus to increase
market share and EPS growth. 

"The Group is expected to add another 6,000 mtpa and 7,000 mtpa of capacity in the next phases in FY18 and FY19, respectively. In total, we estimate its combined installed capacity will increase by 52% to 38,000 mtpa by FY19E."

Maybank IB Research noted that flexible F&B packaging products are on a firm growth trajectory with consumption volume having risen at a four-year CAGR (2012-2016) of 1.9% for food and 5.4% for beverage.

"Euromonitor forecasts that global consumption volume of flexible food and beverage packaging will grow by a 5-year CAGR (2016-2021) of 2.7% and 3.8%, respectively from 167m units and 65.2m units each in 2016."

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