Stock Review: NTPM Holdings

I have decided to do a stock review on NTPM Holdings.

NTPM was listed back in April 2003. So what does it do?

Now this is where Uncle Google comes in handy. You just cannot depend on a research report and certainly not any blog as a source for your data. investments. And certainly not when you want to make investment decisions. A wrong judgement based on poor/twisted reports could ultimately hurt you a lot. And this blog is certainly no less.

Anyway my Uncle Google shows me this link: http://www.ntpm.com.my/history.html

NTPM manufactures and trades in toilet paper and tissues and also other paper related products and even diapers. Does it have its own branding? Yes, the brand Premier for tissues is quite popular, the brand Cutie for its toilet rolls and Diapex for diapers. ( see http://www.ntpm.com.my/ntpmbrands.html )

So how has NTPM been doing since its listing? ( Do use this posting as a guide on how to obtain info from Bursa Malaysia website:
Getting Information From Bursa Malaysia Website )

Notes:

1. NTPM shares are at 50 sen par value 10 sen par value. So make sure you do not get mixed up while looking at the dividend per share.
2. Up to 2006, NTPM results have been so rather lacklustre. Poor in fact when you consider the fact that in 2006, its earnings slumped to 21.140 million. (this figure is adjusted to 20.854 as per its fy 2007 q4 notes)
3. For those who like to gauge versus the ipo promised numbers, when NTPM was listed back in 2003, NTPM's guidance earnings were 29.6 million for fy 2003 and 34.6 million for fy 2004). Comparing these numbers to what NTPM did, NTPM was considered to be an underperformer.
4. That 2006 earnings slumped a lot and that NTPM did not explain much at all in its earnings notes. ( Quarterly rpt on consolidated results for the financial period ended 30/4/2006 )
5. Had to search its 2006 q1 notes for the following explanation.
   ( The Group’s profit before taxation decreased from RM4.83 million in the previous financial quarter ended 30 April 2005 to RM2.39 million in the current financial quarter ended 31 July 2005 mainly due to increase in cost of production overheads, delivery costs, advertising and promotion costs, interest expense and provision for tax penalties as disclosed in Note 12. )

More notes:

1. Arrrrghhhhh!!!! fy 2005 earnings had been ammended. This was NTPM fy2005 q4 earnings. Quarterly rpt on consolidated results for the financial period ended 30/4/2005. This was NTPM fy 2006 q4 earnings. Quarterly rpt on consolidated results for the financial period ended 30/4/2006. See how the earnings for fy 2005 had been adjusted to 21.013 million.

NTPM was hardly in the news. Here's a rare on the Edge Weekly back in March 2006.

• Investing Ideas: Decent dividends at NTPM
  By Maryann Tan
  
  Investors on the hunt for high dividend yield stocks know it is not always the blue chips or large caps that give good profit paybacks. The smaller companies offer good yields as well if one bothered to look.
  
  Tissue and sanitary paper products maker NTPM Holdings Bhd offers that investment proposition. In its last quarterly earnings release, it surprised shareholders by declaring an interim dividend of 1.6 sen. With a final dividend declaration expected for the fourth quarter, one analyst is expecting a gross dividend yield of 10%, over current price levels of about 32 sen.
  
  Hwang DBS Vickers Research, the only research house that covers NTPM, estimates total dividend of 3.2 sen for NTPM's fiscal year ending in April. This trend should continue for the next two years as the company finds itself with more cash reserves because of lower capital commitments.
  
  "This year's dividend payout may amount to more. They should be declaring one that is of at least equal quantum in the fourth quarter," says Vincent Khoo, head of research at Hwang.
  
  It is understood that NTPM has a policy of paying out roughly 40% of its net profits as dividends.
  
  Earnings for the current financial year, however, are expected to be lower than last year's RM28.5 million because rising raw material costs in the first two quarters took a toll on the company's performance. But the third quarter started to show improvement as NTPM adjusted its selling prices by an average of 5% last October.
  
  The three-month period ended January showed a marginal net improvement of 11.3% compared to a year ago. Operating profit was also up 35% to RM9.2 million as revenue grew 8.4%. Operating profit in the nine-month period fell 13.3% even as revenue grew 6.5% to RM176.5 million.
  
  The main cost pressures came from the rising cost of scrap paper, the price trend of which follows that of global newsprint. Prices of premium quality newsprint traded in the US, for example, have risen 136% over the past year.
  
  Still, NTPM's bottom line performance should be back on track by 2007, allowing the company to maintain its dividend payouts.
  
  NTPM went public in 2003 as Malaysia's leading producer of toilet paper, facial tissues, kitchen towels, serviettes and other napkins. Its box tissue brand Premier dominates the local market with a 55% share. Its closest competitor is Kimberly Clarke.
  
  While it has introduced other paper-based products, such as diapers and sanitary napkins, in its product range, tissue products remain its staple revenue earners.
  
  Post-listing, NTPM invested in expanding its capacity to produce tissue products. By 2005, it had an additional 100 tonnes a day of tissue paper output on top of its existing 150 tonnes. That investment cost some RM30 million and was supposed to reduce raw material costs. New export markets were to be NTPM's growth story but it has had modest success in this so far.
  
  It is, however, experiencing fast growth in its sanitary napkin products, reporting a doubling of annual sales last year.
  
  "Due to the encouraging sales achievement, an investment for another production line is already in the pipeline," managing director and controlling shareholder Lee See Jin says in the company's latest annual report.
  
  At the time of listing, Singapore made up 72% of its export market, followed by Hong Kong and New Zealand. Exports account for about 30% of the company's revenue. There has been no update from the company since then.
  
  "Volume of sales at home will continue to improve but they will have to focus on exports now that they have expanded capacity if they want to improve unit costs and practise marginal pricing," Khoo says.
  
  Company representatives were not available for comment at the time of writing.
  
  With much greater capacity to produce, NTPM calls itself a world-class tissue manufacturer but it has not yet attained the levels of success seen by local latex glove makers.
  
  Its growth strategy is clearly facing some setbacks. Its balance sheet as at January 2006 appears strained, with net current liabilities of RM5.2 million albeit lower than the RM9.2 million seen last April.
  
  Still, Khoo trusts improving sentiment on small caps should benefit the company.
  
  "Liquidity is coming back; there's more money looking for new homes. I believe fundamentally sound companies like this should be able to sustain investor interest," he says.

And here is a OSK report back in 2006. (It's an important read for it explains the better performance for NTPM's fy2007.

• Investment Research
  
  Monday, September 25, 2006
  
  BUY Price RM0.32 Target RM0.42
  
  Arhnue Tan
  
  NTPM Holdings
  
  Rolling out the goods
  
  Above expectations. NTPM, Malaysia’s biggest tissue product manufacturer reported 1QFY07 annualised net profit a whopping 32% above our expectations. Y-o-y, revenue and net profit saw growth of 19.0% and 742.5% respectively owing to a one-off tax penalty of RM1.6m incurred in the previous corresponding quarter. Excluding the penalty, net profit still grew 208%.
  
  Increased capacity drives growth. We can attribute this quarter’s increase in revenue to the recently installed 100 MT per day of additional capacity in September last year, bringing NTPM’s current installed capacity to 91,205 MT per annum. Also, continued growth in demand for tissue products in Malaysia, Singapore and Thailand also appears to be driving sales as NTPM actively advertises its products and has much focus on branding. To note, the key brands under the Group include household names like Premier, Royal Gold, Cutie and Intimate (sanitary pads).
  
  Operational efficiency drives margins. The key highlight of this quarter’s result is the vast improvement in PBT margins from 4.3% in 1QFY06 to 14.6% in 1QFY07. The improvement has been driven by management’s dedication to improve operational efficiency as well as pushing higher margin products. Not forgetting, there was a 5% increase in pricing incorporated recently to keep up with prices of pure tree pulp and transportation costs. As for q-o-q comparison, margins also saw encouraging improvement due to start-up cost of new machinery last quarter.
  
  Increasing exports. To note, NTPM has begun sales in a major hypermarket chain in Thailand and is looking to increase advertising activities to push its brands. While exports to Thailand still take up only less than 5% of total revenue we see this market contributing significantly going forward.
  
  It’s a girl thing. NTPM’s sanitary napkin line saw 35% growth last year and we do expect a repeat performance this year. Currently taking up 10% of revenue, this should increase to at least 15% by FYE considering new machinery recently installed and increased brand awareness.
  
  Maintain Buy. We tweak our estimates up slightly and maintain our call on NTPM. With a single digit PE of 8.4x and no listed comparables, we have used DDM valuation to derive our fair value of RM0.42 (previously RM0.40) or potential upside of 31%. Prospective dividend yield for FYE07 is at 9.4% with a 51% payout ratio (60% in FYE06).

And here is the updated earnings.

Notes:

1. As can be seen, since 2006, the fortunes of this company has turned wonderfully.
2. Earnings has been on the up and the dividends paid each year has been increasing. ( I am not a numbers fanatic. Some would start counting out the percentage paid versus its earnings etc etc etc)
3. fy2009 total dividends includes the proposed final dividend (amounting to RM16,286,400 )
4. There was a bonus issue back in March 2009. Bonus Issue. It's a four for five bonus issue. Now if one did not own any shares in NTPM previously and is now seduced to do so, that bonus issue is important to note because the number of shares in NTPM is now increased to 1,123,200,000 shares. And if one is investing in NTPM for its dividend yield, one would need to base their assumptions on this figure.

The following screen shot is from Star Biz website. It shows a rough idea how NTPM is doing on a quarter-to-quarter basis.

Recent news coverage: NTPM in paper recycling venture and NTPM goes green.

Brokerage coverage: OSK ( I am not sure if Hwang DBS still covers it or not.) (CIMB, RHB, MIB and KN do not cover this stock at all).

Here is screen shot of OSK's coverage.

And here is sreen shot of OSK earnings forecast for NTPM.



Here is the impressive chart for NTPM.

Other notes:

1. Group managing director has been disposing shares despite the impressive earnings and the fantastic dividends payout.
2. LTH is an investor and recently was an active buyer in March-June 2009.

That's all from me.

If anyone has any comments feel free to chip in.

And last but not least, I really do not know if you can lose money in this stock since I have no idea if this stock would go up or down. So it would be pointless to give me credit if the stock goes up or down.