CIMB Research has Outperform on Daibochi, Tomypak

KUALA LUMPUR: CIMB Equities Research is bullish long-term on the plastic flexible packaging (PFP) sector and recommend an Overweight on the sector.

It said on Tuesday, Jan 26 that after struggling for much of the past decade, the industry went through a major turnaround in 2009 and should continue to pack in the growth this year.

“We are starting coverage on the country’s two largest PFP producers, Daibochi and Tomypak with an Outperform recommendation for both stocks given the likelihood of further re-rating of the stocks,” it said.

The factors are driven by margin expansion over the next few quarters, new contracts from non-F&B customers and their attractive gross dividend yields of 7%-8%.

CIMB Research has a target price of RM4.50 for Daibochi based on 12 times CY11 P/E, a 20% discount to its 15 times target market P/E.

For Tomypack, its target price is RM4.55, based on 8.4 times CY11 P/E, a 30% discount to our 12 times target P/E for Daibochi given its smaller market cap, poorer liquidity and less exposure to the non-F&B sector.

Trading liquidity is poor for both stocks and market cap is small at US$28 million to US$64 million. However, this is offset by their strong potential share price upside and attractive dividend yields.