TGuan ... Worst Over

The company reported a net loss of rm4.2 million in 4QFy2014, from net profit of rm6.3 million in 4QFy2013 due to one off impairment loss on receivables of rm5.5 million, realized and unrealized forex losses of rm4.1 million and losses related to relocation of its China based operations.

 

It is believed the worst is over for the company and expect a stronger 2015, underpinned by capacity expansion and the shift to higher margin products – thin stretch films and PVC food wrap.

It had completed the 1^st phase of expansion at end 2014 with the installation of its state of the art thin stretch film machines, four additional lines for PVC food wrap and new machines for the compounding division.

It will invest an additional rm40 million in 2014 for its first 33 layer nano technology stretch film line, a blown film line more PVC food wrap machines.

It is the sole manufacturer of PVC food wrap in Malaysia and one of only three in ASEAN. It aims to be the largest producer in the region by 2016. Profit margin from this segment is the highest amongst its business units.

The weaker ringgit will improve its competitiveness against global risks.

Earnings will also be boosted by lower resin prices, which are correlated to crude oil. Raw materials account for about 80% of operating costs.

It is currently trading at a huge 37% discount to book value (14 April 2015). Historical PER is 12.4 times.