Lately, I have been searching for a company which has good profit margins, a business model which is non-conventional (i.e., not manufacturing, banking, plantation, and trading in nature), and resilient to external market shocks. I hope I have found the right company! This week I will be looking at Cypark Resources Berhad (5184). Cypark is a company that is involved with the provision of environmental solutions. It has 4 main business segments which are: 1. Environmental engineering: Provision of nature conservation and environmental improvement services. 2. Landscaping and infrastructure: Provision of landscape services, project management services, and infrastructure development. 3. Maintenance: Provision of specialist maintenance works on leachate treatment plants, landscape services for parks, and maintenance of public amenities. 4. Green technology & renewable energy: Solar panel, biogas, biomass, waste-to-energy, and other renewable energy project...
As you may know, most stocks on Bursa Malaysia have traded lower in recent weeks due to the bearish sentiment and lack of positive factors. Share prices may continue to retrace or consolidate, but either way, it is good to keep your options open. Ornapaper Berhad (5065) is a company I came across due to tips from my acquaintance, and thought I should review this stock.
Ornapaper Berhad is a company involved in the paper packaging industry and is listed on Bursa Malaysia. To be precise, it designs, manufactures and sells corrugated boxes and carton boxes within Malaysia. It derives about 90% of its revenue is from the paper packaging industry while the remaining 10% of its revenue is from the manufacture of paper-based stationery.
Picture 1: Carton Boxes
Carton/corrugated boxes have many uses and serve the needs of multiple industries. Among the industries that it serves is the electrical and electronics, food and beverage, furniture, textile, rubber, plastic, and agriculture industry. It should be noted that it has an annual production capacity of 100,000 metric tonnes of paper boxes.
Chart 1: Share price of Ornapaper Berhad
Ornapaper’s share price has recently retraced from a high of RM1.61 to RM1.31 – a retracement of approximately 19%. For those planning to invest in this company, this is viewed as a significant discount to its previous share price. Ornapaper’s share price had been sluggish from January 2016 to May 2017. The company started to garner the attention of investors only after May 2017; notice the spike in share price towards the end of May 2017 in Chart 1. For those who had missed their chance in May 2017, now might be a good time to invest in this company.
Table 1: Financials of Ornapaper
From its profit and loss statement, it can be said that its financials are not spectacular. It does not enjoy fat profit margins like other industries; growth in terms of revenue and profitability has been almost stagnant. However, it should be noted that it is trading at a big discount to its net book value. At RM1.31, it is trading at a discount of about 36% to its net book value.
In my opinion, due to the unexciting prospects of its financials, this could be the reason why it is not trading at a higher price to earnings ratio. At RM1.31, it is trading at its historical past 4 quarters’ price-earnings (PE) ratio of approximately 8. I would describe this company’s financials as consistent as its profit margins are roughly similar from year to year – only improving slightly in 2017.
Table 2: Financial Position of Ornapaper
The reason for displaying this table is to get a better understanding of its financial position. Noticed that I specifically tabled out its total borrowings and highlighted trade bills in red. Ornapaper’s trade bills are denominated in ringgit and are used to finance its trade purchases. The highlighted area in green in Table 2 are my workings in trying to understand the cash position of Ornapaper – it can be seen that it is in a net cash position. Ornapaper’s combined cash and trade receivables are greater than its combined trade payables and total borrowings. In my opinion, its financial position is healthy and its borrowings are manageable.
Does Ornapaper have any investment merit?
With its net assets per share of RM2.04 and consistent earnings per share of 10 cents per annum –probably yes. However, the company has not been generous in terms of dividends. Its dividends averaged 2.5 cents per share per annum for the past 3 years – a dividend yield of 1.91% at its current share price of RM1.31. A dismal rate for those seeking dividend income. Therefore any investment gains from investing in this company would most probably come from capital gains.
Final thoughts
The reason I am writing this article is because I think that Ornapaper is trading at its support. If it manages to find support at its current price level, I think investors would stand to gain from investing in this company. Investing does come with its risks as well. At this period of time, market sentiment has been bearish and most stocks have been beaten down from its high. However, it should be noted that during times of pessimism there are pockets of opportunity. In my opinion, investing in this company at this price level is a decent opportunity.
Do check out my review of the current market sentiment HERE to get an overall picture before considering to risk your capital. I have been bearish on the FBMKLCI for some time.
If you like my posts and this blog please SUBSCRIBE in the link above or follow me on Google+ !!! THANKS
Note: This is not a recommendation to buy or sell this stock. The writer does not own shares in this company. The writer intends to share his view point on this stock’s potential investment value, any decision to invest or sell shares in this company is entirely at the reader’s own risk.
Ornapaper Berhad is a company involved in the paper packaging industry and is listed on Bursa Malaysia. To be precise, it designs, manufactures and sells corrugated boxes and carton boxes within Malaysia. It derives about 90% of its revenue is from the paper packaging industry while the remaining 10% of its revenue is from the manufacture of paper-based stationery.
Picture 1: Carton Boxes
Carton/corrugated boxes have many uses and serve the needs of multiple industries. Among the industries that it serves is the electrical and electronics, food and beverage, furniture, textile, rubber, plastic, and agriculture industry. It should be noted that it has an annual production capacity of 100,000 metric tonnes of paper boxes.
Chart 1: Share price of Ornapaper Berhad
Ornapaper’s share price has recently retraced from a high of RM1.61 to RM1.31 – a retracement of approximately 19%. For those planning to invest in this company, this is viewed as a significant discount to its previous share price. Ornapaper’s share price had been sluggish from January 2016 to May 2017. The company started to garner the attention of investors only after May 2017; notice the spike in share price towards the end of May 2017 in Chart 1. For those who had missed their chance in May 2017, now might be a good time to invest in this company.
Table 1: Financials of Ornapaper
From its profit and loss statement, it can be said that its financials are not spectacular. It does not enjoy fat profit margins like other industries; growth in terms of revenue and profitability has been almost stagnant. However, it should be noted that it is trading at a big discount to its net book value. At RM1.31, it is trading at a discount of about 36% to its net book value.
In my opinion, due to the unexciting prospects of its financials, this could be the reason why it is not trading at a higher price to earnings ratio. At RM1.31, it is trading at its historical past 4 quarters’ price-earnings (PE) ratio of approximately 8. I would describe this company’s financials as consistent as its profit margins are roughly similar from year to year – only improving slightly in 2017.
Table 2: Financial Position of Ornapaper
The reason for displaying this table is to get a better understanding of its financial position. Noticed that I specifically tabled out its total borrowings and highlighted trade bills in red. Ornapaper’s trade bills are denominated in ringgit and are used to finance its trade purchases. The highlighted area in green in Table 2 are my workings in trying to understand the cash position of Ornapaper – it can be seen that it is in a net cash position. Ornapaper’s combined cash and trade receivables are greater than its combined trade payables and total borrowings. In my opinion, its financial position is healthy and its borrowings are manageable.
Does Ornapaper have any investment merit?
With its net assets per share of RM2.04 and consistent earnings per share of 10 cents per annum –probably yes. However, the company has not been generous in terms of dividends. Its dividends averaged 2.5 cents per share per annum for the past 3 years – a dividend yield of 1.91% at its current share price of RM1.31. A dismal rate for those seeking dividend income. Therefore any investment gains from investing in this company would most probably come from capital gains.
Final thoughts
The reason I am writing this article is because I think that Ornapaper is trading at its support. If it manages to find support at its current price level, I think investors would stand to gain from investing in this company. Investing does come with its risks as well. At this period of time, market sentiment has been bearish and most stocks have been beaten down from its high. However, it should be noted that during times of pessimism there are pockets of opportunity. In my opinion, investing in this company at this price level is a decent opportunity.
Do check out my review of the current market sentiment HERE to get an overall picture before considering to risk your capital. I have been bearish on the FBMKLCI for some time.
If you like my posts and this blog please SUBSCRIBE in the link above or follow me on Google+ !!! THANKS
Note: This is not a recommendation to buy or sell this stock. The writer does not own shares in this company. The writer intends to share his view point on this stock’s potential investment value, any decision to invest or sell shares in this company is entirely at the reader’s own risk.
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