Goodpack upgraded to hold by DBS Vickers with price target of $ 1.69

Stock Name: Goodpack
Company Name: GOODPACK LIMITED

Research House: DBS Vickers

Price Call: HOLD

Target Price: 1.69

DBS Vickers has upgraded Goodpack to a hold, raising its target price to $1.69 from $1.52 following recent share price correction and earnings revisions. “We believe Goodpack is fairly valued at current level, given flattish earnings growth over next 2 years on increasing macro risks and rising Singapore dollar,” says the brokerage.

DBS Vickers’ raised its forecasted FY12-14 EPS by 2-4% after factoring in slightly higher IBC additions for FY12 (210k versus 180k previously) as some customers are experiencing a shortage of IBCs; higher utilisation rate of 53% given run rate of 55%; reduction in annual rental costs to US$17 per IBC addit and lower tax rate of 14%.

In FY11, Goodpack reported PATMI of $43.2 million which was ahead of consensus and DBS Vickers’ expectations of $42 million. 4QFY11 net profit stood at $11.8 million (+57% y-o-y, +11% q-o-q). Goodpack has announced a final DPS of $0.02 and special dividend of $0.01.

The strong FY11 result was driven by rise in revenues to $158.8m (+29% y-o-y) on the back of gains in natural (NR) and synthetic rubber (SR) where market share now stands at 38% and 27% respectively, from 36% and 22% in prior year. EBITDA margins fell to 44.8% from 46.6% in FY10 due primarily to higher leasing costs.

“We expect the downward trend in margins to continue as the company increases its reliance on renting IBC’s rather than a 100% ownership model. PATMI margins were flat at 27.3%, raised by a lower tax rate of 12.1% (14.9% in FY10).”