S$0.34-BWAY.SI
Broadway has opened its new foam plastics factory in Chengdu and this represents the second plant that the company’s foam and plastics division has opened in Sichuan after setting up a factory in Chongqing in Aug ’10. Total production facilities in China stands at 10.
The new factory covers a land area of 25,800 sqm and currently employs over 350 workers. The new plant had commenced operations in June ’11 and will focus on the production of eco-friendly moulded pulp packaging (packaging materials that are made from recycled materials such as corrugated paper, bamboo, newpapers) which is experiencing increasing demand from laptops and tablets. The new plant will be using more environmentally friendly processes such as energy efficient drying ovens and recycled water.
Most importantly, the new plant would put them geographically closer to their key customers such as Foxconn and HP to serve them better.
The above is in line with management’s previous guidance, but we understand that since our last update with management in July ’11 (during their 2Q ’11 results briefing), order flows from their major HDD and non-HDD customers have weakened and the usual seasonal strength in 2H11 may not recur this year.
This suggests that consensus full year estimate of $28mln will likely have to be revised down to $25-26mln, giving a forward PE of 5-6x.
While valuations are not demanding, it is nevertheless in line with the company’s usual historical trading range.
We have a Neutral recommendation on Broadway.
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