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