NTPM (FV RM0.55 - NEUTRAL) 9MFY12 Results Review: All is Well

Stock Name: NTPM
Company Name: NTPM HOLDINGS BHD

Research House: OSK

Price Call: HOLD

Target Price: 0.55

NTPM'sresults were in line with our forecasts, constituting 78.8% of our full-year estimates.Revenue inched up 5.8% y-o-y, mainly bolstered by stronger sales of personalcare and paper products. Nonetheless, net profit contracted by 18.5% owing tohigher raw materials and operating costs, while EBIT margin was 3.6 pct ptslower at 13.7%. Maintain NEUTRAL, with a higher FV of RM0.55, as we roll over ourvaluation to FY13 based on a PER of 13x.

Higher revenue from product sales. NTPM's 9MFY12 revenueimproved by 5.8% y-oy from RM315.8m to RM334.2m, mainly boosted by robustgrowth in personal care products (+22.1%) and paper products (+2.6%). Thehigher sales of baby diapers contributed to the growth in personal care productrevenue while the improved  demand fortissue products in the domestic market underpinned growth in the paper product segment.Despite the higher topline, the group's net profit slipped 18.5% y-o-y on the backof higher raw material prices as well as staff and utility expenses. Vis-''-vis 1QFY12,revenue and earnings were higher by 4.9% and 53.2% owing to the better EBITmargin.

EBIT margin eases. The EBIT margin continued to moderate by 3.6% to 13.7% y-o-y, nothanks to higher pure and recycled pulp prices, as well as higher staffexpenses and utility cost. As a result, the company's 9MFY12 earnings droppedfrom RM40.5m to RM33m y-o-y. However, on a q-o-q basis, EBIT margin improved to16.4% from 12.2% due to the lower cost of materials compared with that in thepreceding quarter. We expect margins to improve further on the back of lowerpulp prices and the recent upward adjustment in selling prices for NTPM's babydiaper products.

To pay interim dividend. The group has declared aninterim single-tier dividend of 1.45 sen for the quarter under review to rewardits shareholders.

Maintain NEUTRAL. We are leaving our forecasts unchanged as the company's results werewithin our expectations. Nevertheless, we are bumping up our FV to RM0.55 from RM0.48previously as we roll over our valuation from FY12 to FY13.

Source: OSK188

High Costs Dampen Margins

Stock Name: NTPM
Company Name: NTPM HOLDINGS BHD

Research House: OSK

Price Call: HOLD

Target Price: 0.48

Tougher period ahead for NTPM

Stock Name: NTPM
Company Name: NTPM HOLDINGS BHD

Research House: OSK

Price Call: SELL

Target Price: 0.46

NTPM Holdings Bhd
(Sept 26, 51.5 sen)
Downgrade to sell at 53 sen with revised fair value of 46 sen (from 53 sen): NTPM's 1QFY12 revenue and net profit came in at RM107 million (13.2% year-on-year) and RM9.2 million (-25.6% y-o-y), below our full-year forecast of RM49.6 million. The stronger revenue was mainly driven by the 9.7% sales growth in its tissue products (79.7% of total sales) and 29% revenue growth in the personal segment which contributed 20.3% of the sales pie. Baby diapers categorised under the personal care segment grew by 69.1% y-o-y to RM10.5 million due to their affordable prices.

1QFY12 Ebit margin fell 5.8 percentage points y-o-y to 12.2% due to: (i) the gas and electricity price hikes of 7%-8% since June 2010; (ii) higher pure (+32.4% y-o-y) and recycled pulp prices; and (iii) higher indirect raw material prices such as chemical and packaging. Also, NTPM is now currently using 100% pure pulp for its facial tissue products instead of blending with recycled pulp which is cheaper than pure pulp.

While the management guided that 2Q margin could be better due to the higher sales volume during the recent Hari Raya festivities, we believe margins will remain under pressure in the near term due to higher utility cost and recycled pulp price although indirect raw material and pure pulp prices have stabilised. Furthermore, the ringgit is expected to weaken against the US dollar in 2012.

Having said that, we expect pulp prices to retrace if global economic condition worsens and this could bode well for NTPM. We understand that NTPM has no intention to pass on the cost increase to consumers and will take necessary measures such as the launch of new products to cope with the higher operating cost environment.

Given the weaker-than-expected results, we cut our FY12/FY13 earnings forecasts by 13.3% and 12% to RM43 million and RM48.5 million respectively, incorporating higher utility and labour costs and recycled pulp prices. Our fair value is reduced accordingly to 46 sen. This gives 10% more downside versus its last closing price of 53 sen, and we downgrade the stock to 'sell'. ' OSK Research, Sept 26


This article appeared in The Edge Financial Daily, September 27, 2011.

NTPM slides on 26pc Q1 profit decline

Stock Name: NTPM
Company Name: NTPM HOLDINGS BHD

Research House: OSK

Price Call: SELL

Target Price: 0.46

NTPM Holdings Bhd, a Malaysian tissue-paper maker, fell the most in seven weeks in Kuala Lumpur trading after fiscal first-quarter profit dropped 26 percent to RM9.23 million.

The stock slid 3.8 percent to 51 sen at 9:11 a.m. local time, set for its biggest drop since Aug. 8. -- Bloomberg

NTPM: Pulp prices stubbornly high

Stock Name: NTPM
Company Name: NTPM HOLDINGS BHD

Research House: OSK

Price Call: HOLD

Target Price: 0.53

NTPM Holdings Bhd
(June 27, 53 sen)
Maintain neutral at 53.5 sen with revised target price 53 sen (from 52 sen): NTPM's FY11 results were within our full-year net profit forecast of RM50.5 million. Revenue grew 9.7% year-on-year to RM420.2 million while net profit dropped 12.2% y-o-y to RM52.1 million. The stronger results were mainly driven by higher selling prices and partially by higher sales of tissue products (+6.3% y-o-y). While its personal care products still account for only 18.5% of full-year sales, this segment recorded a strong 27.3% sales growth y-o-y, bolstered by higher sales as NTPM offers competitive pricing to capture market share. Geographically, local sales jumped by 9.7% while overseas revenue, mainly driven by Singapore sales, grew by 9.5% y-o-y.

FY11 earnings before interest and tax (Ebit) margin came in at 16.5% against 20% in FY10 against a backdrop of higher pulp prices ( about +35% y-o-y), and the use of 100% pure pulp instead of a mix of recycled and pure pulp for NTPM's pocket and facial tissue.

NTPM's tissue product manufacturing utilisation rate is about 80% currently. To further boost sales of its tissue products, the main driver of group revenue, we think that NTPM would need to ramp up the number of manufacturing lines, or even consider acquiring another tissue manufacturer, to defend its lion's share of the tissue market of more than 60% in Malaysia. Although its personal care products are gaining market share, we understand that competition in this segment is intense while its overseas sales are still small.

Although the results are in line, we cut our FY12 earnings forecast by 15.8% to RM49.6 million on sticky high pulp prices and higher utility costs as electricity rates for industrial use have increased by an average 8.35% since June 2011. Our fair value, however, is moved up to 53 sen, which pegs NTPM at a higher price-earnings ratio of 12 times (10 times previously). This is because we think that given its dominant 60% share of the local tissue market and decent dividend yield of more than 5%, NTPM deserves a higher valuation. Despite lower profit, the company declared a total single-tier dividend per share of 2.9 sen, more than a 60% payout ratio. ' OSK Research, June 27


This article appeared in The Edge Financial Daily, June 28, 2011.

NTPM - Higher pulp prices may erode NTPM's margins

Stock Name: NTPM
Company Name: NTPM HOLDINGS BHD
Research House: OSK

NTPM Holdings Bhd
(March 14, 54.5 sen)
Maintain neutral at 54.5 sen with target price 52 sen: NTPM's 9MFY11 results were within our full-year net profit forecast of RM50.5 million. Revenue grew 9.0% year-on-year (y-o-y) to RM315.8 million while net profit fell 10.4% y-o-y to RM40.5 million. While the group raised selling prices in November in view of rising pulp prices, its actual impact was felt only in January. Hence, the better sales were mainly driven by higher sales. Geographically, local sales jumped 9.4% y-o-y while overseas revenue grew by 8.2% y-o-y.

While the group has been aggressively promoting its sanitary napkins (+8.3% y-o-y) and baby diapers (+67.3% y-o-y) by offering competitive prices, the bulk of the revenue was still mainly driven by tissue product sales, which made up of 89.7% of its 9MFY11 revenue. On a quarter-on-quarter (q-o-q) basis, revenue grew 7.9% while net profit surged 27.3%.

Despite the higher sales, which would have helped NTPM achieve higher economies of scale, the lower cumulative net profit y-o-y was due to higher raw material prices. Prices of pulp, making up 80%-90% total raw material costs, rose 12.7% from the corresponding period previously. Accordingly, earnings before interest and tax (Ebit) margin narrowed from 20.3% in 9MFY10 to 17.3% in 9MFY11. Nonetheless, despite the higher pulp price q-o-q, Ebit margin improved by 1.9 percentage points q-o-q, driven mainly by the higher selling price imposed in November 2010, although the actual impact was only felt in January 2011.

To improve the quality of its products to maintain market share, the group currently uses 100% pulp to produce its pocket and facial tissue. We see margins in the following quarter staying at the current level after accounting for the higher selling price and stronger US dollar against the ringgit, which will collectively offset the seasonally lower sales and higher pulp prices.

We maintain our FY11 and FY12 earnings forecasts at RM50.5 million and RM58.9 million respectively. Our target price is maintained at 52 sen, based on 10 times FY12 EPS. Although year-to-date net profit was lower at RM40.5 million versus RM45.1 million in 9MFY10, the group has declared a single tier dividend per share of 1.45 sen, the same as that paid in 3QFY10. ' OSK Research, March 14


This article appeared in The Edge Financial Daily, March 15, 2011.

NTPM - OSK Research maintains Neutral on NTPM, TP 52c

Stock Name: NTPM
Company Name: NTPM HOLDINGS BHD
Research House: OSK

KUALA LUMPUR: OSK Research is maintaining its Neutral stance on NTPM and keeping its Target Price at 52 sen, based on 10x FY12 EPS.

OSK Research said NTPM's 9MFY11 revenue, which grew 9.0% y-o-y to RM315.8m while net profit fell 10.4% y-o-y to RM40.5m, were within its expectation.

The higher revenue was mainly driven by higher sales (mainly of tissue products) as the higher selling price of 5%-10% had only a 1-month impact on the current quarter.'' EBIT margin narrowed from 20.3% in 9MFY10 to 17.3% in 9MFY11.

'Despite rising raw material prices, we see margins hovering at the current level as NTPM revised upwards selling prices by 5%-10% in Nov 2010,' it said.

OSK Research said it maintained our FY11 and FY12 earnings forecasts at RM50.5m and RM58.9m respectively. Our TP is kept at RM0.52, based on 10x FY12 EPS. Maintain NEUTRAL.