CIMB Research rates Daibochi and Tomypak as Outperforms

Written by CIMB Equities Research
Thursday, 01 April 2010 08:37

KUALA LUMPUR: CIMB Equities Research is maintaining its Overweight on the companies in the flexible packaging sector and continue to rate Daibochi and Tomypak as Outperforms.

It said on Thursday, April 1 companies in its coverage, Daibochi and Tomypak, demonstrated their ability to pass on rising raw material costs to their customers, going by the double-digit pretax margins they recorded for four straight quarters.

“This profit margin trend should continue in 2010, driven by similar catalysts as in 2009, which included food safety and rising demand for metallised film,” it said.

CIMB Research said it made no changes to its earnings numbers or target prices. Daibochi's target price of RM4.60 is based on 12x CY11 P/E. For Tomypak, it value the stock at a 30% discount to Daibochi, i.e. 8x CY11 P/E. This gives an unchanged target price of RM4.66 for Tomypak.

Potential re-rating catalysts for both stocks include i) further margin expansion over the next few quarters, ii) contracts from major non-F&B companies and, iii) attractive dividend yields of 5%-6%.