Goodpack (KimEng)

Event

FY11 results were slightly higher than expectations. Even amidst challenges with rising oil prices, forex losses and the Japanese nuclear disaster, Goodpack posted strong profit growth of 29%, proving that its long-term growth story remains very much intact. We believe the current market weakness may prove to be a good buying opportunity for this stock which surely has its best years ahead. Maintain BUY.

Our View

FY11 net profit was US$43.2m, driven by yoy revenue growth of 29%. Impressively, revenue from the synthetic rubber segment grew by a record 57% (for the first time this segment now accounts for more than 50% of revenue), as Goodpack grew its market share here from about 18% to 27%. This vindicates our earlier investment thesis that although Goodpack takes considerable time to enter new markets, the penetration rate accelerates once it gains a foothold.

Natural rubber segment also grew 21%, mainly due to demand recovery. Market share

here is now about 38%. Operating and net margins were maintained at 35% and 20% respectively. Profitability would have been higher if not for forex translation losses of US$2m.

Fleet size is now 2.5m (about 400k under lease). Trials with more than 20 auto-part makers are ongoing, although no concrete contracts have been signed. Though we expect some of these to sign up over the next twelve months, we only factor in major contribution by 2014F, becoming the next growth engine, after synthetic rubber.

Action & Recommendation

We factor in the likelihood of a mild economic slowdown and reduce our estimates by 3-4%, but still expect growth from synthetic rubber and further trade-lane matching. In fact, we believe auto-makers need to reduce cost in a recession will be favourable to Goodpack IBC’s value proposition. Maintain BUY with a TP of $2.18, pegged to 20X FY12F.

FJ Benjamin: Positioning for growth (DMG)

(BUY, S$0.32, TP S$0.44)

4QFY11 revenue growth supported by strong consumer demand. FJB’s 4QFY11 PATMI of S$2.3m (-23.7% YoY) was in line with our estimates. This was on the back of revenue growth of 25.2% to S$88.8m. PATMI was dragged down by higher A&P expenses (+54.7% YoY) as FJB rolled out more campaigns to ride on the rising consumer sentiment to boost sales. Despite the economic slowdown in US and Europe, its RAOUL label continues to receive healthy order levels. Our DCF-based TP has been lowered to S$0.44 (from S$0.52) as management has more aggressive plans to have at least 20 new outlets in the region in FY12 (we had initially projected two new outlets, net of any closures). We believe FJB would be able to continue to grow in the next few quarters, supported by its strong brand portfolio and Asian retail network. The recent dip in share price presents a good opportunity to pick up the stock. We are estimating earnings of S$16.0m in FY12. Maintain BUY for a company with steady dividends.

Positive trend continues for RAOUL. Although uncertainty hangs over the US and Europe

economies and consumer sentiment, Asia remains an attractive destination for fashion labels,

amid rising Asian consumerism. Consumer sentiments across FJB’s key markets are still

healthy, though management is cautiously optimistic. Having come from a small base, FJB

continues to see healthy demand for its RAOUL products in US and Europe. It is receiving reorders from its US customers and will be establishing a showroom in Milan to cater to customers in Europe. Contribution from RAOUL is still small and management expects the label to breakeven in 18 months.

Indonesia market expected to be a growth driver. Consumer spending in Indonesia remains

strong, supported by its healthy economy. FJB plans to open 12 new stores there in FY12. FJB

recently entered into collaboration with PT Sukses in Indonesia, to explore opportunities in

Indonesia relating to the manufacturing, retail, distribution and marketing of fashion products.

Goodpack - Flat growth on rising macro risks (DBSVickers)

HOLD S$1.64 STI : 2,748.18

Upgrade from Fully Valued

Price Target : 12-Month S$ 1.69 (Prev S$ 1.52)

Reason for Report : FY11 Results/Earninings and TP upgrade

Catalyst: Weaker than expected global economic growth

DBSV vs Consensus: Lower FY12-13 earnings on increased macro risks

• FY11 PATMI of S$43.2m (+29% y-o-y) slightly ahead of expectations on higher share in rubber

• FY12-14F EPS increased by 2-4% on higher IBC (Intermediate Bulk Container) fleet and lower tax

• Upgrade to Hold, TP raised to S$1.69

Profit slightly ahead. Goodpack reported FY11 PATMI of S$43.2m which was ahead of consensus and our expectations of S$42m. 4QFY11 net profit stood at S$11.8m (+57% y-o-y, +11% q-o-q). Final DPS of S$0.02 and S$0.01 special dividend declared.

Revenue up 29% y-o-y The strong FY11 result was driven by rise in revenues to S$158.8m (+29% y-o-y) on the back of gains in natural (NR) and synthetic rubber (SR) where market share now stands at 38% and 27% respectively, from 36% and 22% in prior year. EBITDA margins fell to 44.8% from 46.6% in FY10 due primarily to higher leasing costs. We expect the downward trend in margins to continue as the company increases its reliance on renting IBC’s rather than a 100% ownership model. PATMI margins were flat at 27.3%, raised by a lower tax rate of 12.1% (14.9% in FY10).

FY12-14F EPS revised up by 2-4% After imputing slightly higher IBC additions for FY12 (210k versus 180k previously) as some customers are experiencing a shortage of IBCs, higher utilisation rate of 53% given run rate of 55%, reduction in annual rental costs to US$17 per IBC addit and lower tax rate of 14%, we have revised FY12-14F EPS up by 2-4%

Upgrade to Hold, TP raised to S$1.69 Post earnings revisions, we raise TP to S$1.69 from S$1.52. Following recent share price correction and revised TP, we upgrade to Hold. We believe Goodpack is fairly valued at current level, given flattish earnings growth over next 2 years on increasing macro risks and rising Singapore dollar.