OCEANCASH PACIFIC BHD
By CIMB Research Target price: 76 sen Add
OCEANCASH’s 2017 revenue rose 7.2% to RM89.7mil, driven by a higher sales volume from both the felt and hygiene segments. Its net profit, however, declined 3.2% year-onyear to RM9.8mil.
“Besides a less profitable product mix and a weaker dollar to the ringgit, the management clarified that the year-on-year decline in net profit was due to transfer listing (to the Main Market) expenses of RM200,000 and one-off repair expenses of RM500,000.
“If we were to add back these one-off expenses, 2017 core net profit would stand at RM10.5mil, which is 3.4% year-on-year growth,” said CIMB Research.
Moving forward, it said Oceancash aims to expand its non-woven (hygiene) presence in Thailand, where the bulk of large scale diaper factories are located.
Initially, Oceancash will set up a warehouse facility there as most Thai customers would require a short delivery time.
If demand in Thailand is strong, Oceancash has plans to install two non-woven lines there (total of 2,400 tonnes per annum).
“Currently, the contribution from non-woven sales in Thailand is minimal and Oceancash believes there is a large potential to capture more Thailand-based customers,” the research house said.
For the felt segment, CIMB Research said Oceancash believes the Indonesian market remains competitive in terms of pricing.
“However, it is currently in talks with new Indonesian customers, including those in the mattress and air-conditioning industries.
“To be more competitive in Indonesia, Oceancash may lower its selling prices, in our view.
“Still, we view this potential move positively as its felt facility there is under-utilised at a 33% utilisation rate.
“In view of this, Oceancash expects the facility’s utilisation to increase from 33% to between 40% and 50% in 2018.”
Potential re-rating catalysts for the company include higher-than-expected demand for its felts in Indonesia and hygiene products in Thailand, and large contract awards from new customers in Indonesia, said CIMB Research.