[The Edge Daily] CIMB Research keeps BUY on Daibochi, TP RM3.92
25 April 2011
KUALA LUMPUR: CIMB Equities Research keeps its BUY Call on Daibochi Plastic & Packaging target price of RM3.92, which is based on a 30% discount to its CY12 target market P/E of 14.5 times.
The research house said on Monday, April 25 Daibochi remains its top pick in the packaging sector.
CIMB Research said Daibochi’s prospects for 2011 look promising as its negotiations with some of its new or potential MNC customers such as BAT, Pepsico and major E&E companies are going well, suggesting that it could secure some major contracts, possibly later this year.
“Although raw material prices continued to head higher in 1Q11, the company was able to pass the costs on to its customers. We maintain our FY11-12 EPS forecasts while noting that the potential for upside if the company clinches some major contracts over the next few quarters,” it said.
The research house said this could catalyse the stock, along with margin recovery and the attractive dividend yields of 8-9%. We reiterate our BUY rating and target price of RM3.92, which is based on a 30% discount to our CY12 target market P/E of 14.5x.
CIMB Research said 2011 should be a better year for Daibochi as its efforts to secure business from some MNCs and major E&E companies should start paying off.
“We estimate that success in negotiations with either Pepsico Thailand or Pepsico Australia could boost Daibochi’s FY12 EPS by 10-20%,” it said.
Daibochi’s pretax profit margin has been declining over the past few quarters. Although raw material prices increased 10% on average in 1Q11, the research house expects the pretax margin to start recovering in 1Q11 as the company has been able to pass on most of the rise in raw material costs since the end of last year, having raised its selling price at end-10 and also last month.
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