KUALA LUMPUR: RHB Research Institute has valued Box-Pak at RM2.35 compared with its current price of RM1.60 as the stock is currently trading at FY12/10 PER of 5.4 times, which is relatively low in comparison to its three-year average historical forward PER of 8.0 times.

It said on Tuesday, March 9 that “we value Box-Pak at RM2.35/share based on 8.0 times FY12/10 EPS".

RHB Research said Box-Pak’s Vietnam operations provided growth for the company in the past four years, growing by a CAGR (FY05-09) of 32.5% (vs. Malaysia of 5%).

Given the strong prospects in the Vietnam market i.e. three times Malaysia’s population size, high proportion of young adults (about 62%), increasing trade liberalisation and early phase of industrialisation, it believes Box-Pak will be a key beneficiary.

As it stands, Box-Pak will be expanding its Vietnam operations by increasing its capacity by 2,000 tonnes in mid-2010 (to 6,000 tonnes) and by another 2,000 tonnes (to 8,000 tonnes) in 2011.

Assuming Box-Pak expands its Vietnam plant from 4,000 tonnes to 6,000 tonnes by mid-10 and operating profit margin normalises at a conservative 10% (when raw material prices climb up) vs. 12-13% in 3Q-4Q09, “we estimate FY10 net profit to be at RM17.6 million, representing 21.5% growth year-on-year”.

RHB Research beyond 2010, growth momentum would be spurred by full-year impact from the higher capacity, additional capacity expansion as well as greater economies of scale.