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Thursday, July 23, 2015

Bright outlook for SLP Resources

PETALING JAYA: SLP Resources Bhd’s latest plan to expand production line capacity is on track and should be available in the coming month or two.
Kenanga Research said in a report that the plastic packaging specialist’s prospects were brighter with the expansion of production capacity for the MaxInflax bags and thin films to materialise in the current quarter.
Besides the capacity expansion, the research house said the company also had new machinery for increased automation and to reduce labour costs.
A strengthening greenback would continue to benefit the company, as sales are denominated in US dollars.
Kenanga Research said the MaxInflax bags’ capacity expansion of 1,800 tonnes annually was on track for the current quarter, with capacity set at 24,000 tonnes annually by year-end.
Demand for the bags mainly comes from Japan, where Askul Corp, an online retailer of office products, is a major customer.
“We expect the 1,800 tonnes annual capacity to contribute an extra RM7mil to RM17mil (or 3.8% to 8.2%) to financial year ending Dec 31, 2015 (FY15) and FY16 revenue,” it said.
It expects MaxInflax thin film to contribute 7.1% and 6.5% of the company’s 2015 and 2016 estimated revenues of RM189.6mil to RM206.7mil respectively.
“All in, the MaxInflax product line is contributing 10.9% and 14.7% to 2015 and 2016 estimated revenues respectively.”
Meanwhile, the MaxInflax new machinery will be used to increase automation, minimising the workforce by 20 for the end-line packing division, which can then be deployed to other areas.
“So far, margins have improved by 5.7% to 9.9% throughout 2014, to 10.8% in the first quarter of this year on a better sales mix and lower finance costs.
“Once the new lines and automation are up to full speed, we expect net margins to improve to 11.3% to 13.6% in the next two financial years, which is far superior compared to its industrial packaging peers of 3.5% to 4.5% or other consumer packaging peers of 6.8% to 11.5%.”

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