Un­der wraps

Finweek English Edition - - Companies&markets -

WHEN IT COMES TO pack­ag­ing shares, Transpaco seems to fall be­tween the cracks. It doesn’t carry the cor­po­rate clout of the gar­gan­tuan Nam­pak nor does it hold the “sec­ond line” ap­peal of As­tra­pak. Nei­ther does it en­joy cult sta­tus of a spe­cial­ist pack­ager, such as Bowler Met­calf. Yet Transpaco – even though it doesn’t boast too much in­sti­tu­tional in­vest­ment back­ing – looks a crack­ing lit­tle op­er­a­tion that serves a num­ber of very vi­able pack­ag­ing niches through­out the paper and plas­tic sec­tors.

In­terim num­bers to end-De­cem­ber 2009 were down­right com­pelling. The op­er­at­ing mar­gin was a nifty 12,4% and af­ter-tax profit hike of 19% to R35m was more than re­flected in the op­er­a­tional cash flow (which came in at R38m). Most im­pres­sive is the ap­par­ent abil­ity to turn mar­ginal op­er­a­tions into mean­ing­ful con­trib­u­tors. Al­though no di­rect ref­er­ence is made, it’s clear from the di­vi­sional break­down that Transpaco has suc­cess­fully tweaked the plas­tic bags busi­ness bought from Nam­pak.

It’s there­fore prob­a­bly sig­nif­i­cant Transpaco is cur­rently putting the fin­ish­ing touches to a deal to ac­quire Disaki Cores and Tubes from Nam­pak. That deal adds an­other leg to Transpaco’s paper pack­ag­ing side and di­lutes the risks as­so­ci­ated with in­put costs linked to the oil price on the plas­tic pack­ag­ing side.

In­terim earn­ings came in at 111c/share on a fully di­luted ba­sis, prompt­ing di­rec­tors to hike the half-year pay­out by more than 50% to 25c/share. The in­creased in­terim div­i­dend would sug­gest di­rec­tors are con­fi­dent Transpaco can main­tain mo­men­tum into the sec­ond half – which tends to be the slightly weaker trad­ing half.

It would seem safe to pre­sume Transpaco should com­fort­ably push earn­ings through the 160c/share mark. This would put Transpaco on a for­ward earn­ings mul­ti­ple of un­der

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