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moneybar
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28-Jul-2007 20:25
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A write up in Business Times today may help to boost the stock price of Full Apex on Monday. Those not invested yet may want to buy into this counter Quote Different fortunes in different markets A tale of three bottle manufacturers listed on two stock markets By TEH HOOI LING SENIOR CORRESPONDENT HOW does one explain such huge discrepancies in the way markets value similar businesses? In focus: The business of Full Apex has Mr Guan's full attention, as it is his only business in China All are broadly doing the same thing - producing PolyethyleneTerephthalate (PET) bottles for international drinks companies like Coca-Cola and Pepsi in the fastest-growing consumer market in the world, China. But paradoxically, it is the most efficiently run company which has the lowest market value. The reason? It is listed in Singapore, while its two rivals are listed in mainland China. The three companies in question are Singapore-listed Full Apex, and China-listed Shanghai Zijiang Enterprises and Zhuhai Zhongfu Enterprise. They are the only three approved PET bottle suppliers to Coke and Pepsi in China. Full Apex was listed on the Singapore Exchange in 2003. Granted, in terms of market share for the supply of bottles to Coke and Pepsi, it is the smallest, at about 15 per cent. The percentage has stayed pretty constant in the last few years, according to company officials. All three companies have more or less expanded at the same pace. Back in 2003, when Full Apex was listed, it had a production capacity of 800 million PET bottles in three plants. Today, it has eight plants with an annual capacity of two billion bottles. That's a 150 per cent capacity expansion in the last three to four years. Shanghai Zijiang expanded its capacity by a similar proportion, from two billion bottles to five billion. But in terms of profitability, Full Apex is superior. Last year, it raked in a net profit of $27.3 million on a turnover of $187.5 million. For the first quarter of this year, it generated $9 million profit from revenue of $52 million. Its operating profit margin is about 20 per cent, while its returns on assets and equity worked out to 14 per cent and 17 per cent respectively. In contrast, Shanghai Zijiang Enterprise managed a net profit of $15.3 million on a turnover of $739 million last year, according to Bloomberg. Its operating margin is a poor 8 per cent, while its returns on assets and equity came to a mere 1.1 per cent and 2.8 per cent respectively. Zhuhai Zhongfu's figures are only slightly better. Its return on assets was 1.9 per cent, and return on equity was 5.5 per cent. But despite its healthier numbers, Full Apex is trading at about nine times its 2006 earnings. Shanghai Zijiang is valued at a staggering 94 times its 12-month trailing earnings, while Zhuhai Zhongfu is trading at 79 times. Perhaps Shanghai Zijiang's rich valuation is in anticipation of its bumper profits this year. Early this month, the group said that 'it is likely to experience a net profit increase within the range of 150 per cent to 200 per cent for the first half of fiscal 2007'. Jordan Hou Bojian, executive director of Full Apex, noted that a foreign fund recently bought a 25 per cent stake in Zhuhai Zhongfu at 65 times earnings. Margin squeeze Full Apex has somewhat fallen out of investors' favour in the last few years because high crude oil prices have squeezed its profit margin - the raw materials for PET bottles are PET chips, which originate from crude oil. To mitigate that, the company invested US$90 million to build its own 200,000-tonne PET chip plant. The plant, the biggest in Guangdong province, started operating a couple of weeks back. The PET chip production is expected to be at full capacity from now onwards. The next two months' output has already found buyers, said Mr Hou. Some 20 per cent of the PET chips will be used by Full Apex's bottle factories. The rest will be sold to other Chinese PET bottle makers. The long-term plan is to export to the US and Europe. Hence, PET chips will be a new stream of income - and a big one at that - for Full Apex. Mr Hou expects half of the group's revenue for 2007 will be from sales of PET chips. Net profit margin for PET chips, however, will be at a lower 3 per cent. On the PET bottles front, utilisation of its seven established plants is expected to increase while the new plant in Hangzhou will start operating in September. 'This will be a significant year for Full Apex,' said Mr Hou. 'Three factors will significantly boost our profit and loss account this year. We'll have the maiden contribution from the PET chips plant and the Hangzhou PET bottle factory. And the utilisation of our PET bottles plants is expected to improve by 5 to 10 percentage points, leading to improved margins.' On average last year, the utilisation rate of the group's PET bottle plants is less than 50 per cent. UOB Kay Hian, the only broking firm to cover Full Apex, expects the group's net earnings to jump 30 per cent to 178.1 million yuan (S$35.7 million) for the current year. This means Full Apex is trading at about 7.3 times this year's earnings. The broking firm has a target of 55 cents for the stock. 'In the last few years, we've been busy expanding,' said Mr Hou. 'Only now are we communicating with investors more. And in the next few years, we'll get a chance to enjoy the fruits of our hard work.' He pointed out that Full Apex has no bad debts and generates strong cash flows every year. There have been suggestions that Full Apex's founder Guan Lingxiang, who is now chairman and managing director, should place out some shares in order to improve the liquidity of the stock. Mr Guan and his wife now own 65.8 per cent of the company. Mr Hou said that Mr Guan has shot down the idea as he deemed Full Apex under-valued at current levels. Mr Guan started Full Apex in 1996 to make corrugated paper packaging products, and according to Mr Hou, he was invited by Pepsi and Coke in 1999 to set up PET bottle plants. The business of Full Apex has Mr Guan's full attention, as it is his only business in China, said Mr Hou. Meanwhile, given the extremely rich valuations enjoyed by China-listed entities, Mr Hou added that the group is exploring the possibility of spinning off some Full Apex units for listing on the mainland. But no decision has been made yet. All things considered, it would appear the odds are favourable for the group to deliver decent returns for investors in the short to medium term. Unquote |
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spurs88
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20-Jun-2007 10:36
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UOBKayhian targets $0.55 this morning!!!!!!!!!!CHEONG AH!!!!!!!!!! ull Apex is transforming itself from a pure downstream PET bottles maker to a one-stop packaging service provider through moving upstream to PET chips operation. Its primary businesses include PET chips, PET bottles, shrink film and corrugated paper packaging. We are positive on its vertical integration move, which we believe will reduce FA's operating risk, improve operation efficiency and enhance its margins in the long run. We expect Full Apex's earnings to grow a CAGR of 28% in FY07-09. For FY07 and FY08, the earnings drivers are PET chips capacity release and PET bottles utilization improvement. While for FY09, the catalyst would be operating margin increase. As such, we raise our net profit forecast by 8% and 24% correspondingly. Dased on a DCF model(cost of equity of 15%, and terminal growth of 2.5%), we derive our price target of S$0.55. This represents 9.4x and 7.6x for FY08 and FY09 earnings. We believe our target price is undemanding given its 28% net profit growth in FY07-09. The target price offers 46% upside from current level, which looks very attractive. Reiterate BUY. |
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jackwu
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06-Jun-2007 23:14
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FullApex have a new plan will build up 2Q2007 in GuangZhou. it is valued US$90m and 200,000 ton/year PET plastic product capacity, this may positived for further income and profit. |
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gombong
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02-Feb-2007 16:41
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Anybody have any information on when are they gonna release their result ? |
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gombong
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02-Feb-2007 16:40
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Anybody have any information on when are they gonna release their result ? |
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Hulumas
Supreme |
27-Jan-2007 13:23
Yells: "INVEST but not TRADE please!" |
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Dear iPunter, Hope your greeting to me will come true, thank you and you are so kind hearted. |
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iPunter
Supreme |
26-Jan-2007 23:24
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Dear Hulumas... From the way you are buying, by 2008 or before, you'll really fat... hehe.. :) |
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Hulumas
Supreme |
26-Jan-2007 23:18
Yells: "INVEST but not TRADE please!" |
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Dear Readers, This stock will be very good along with Huan Hsin in 2008, just one more year to go! |
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Stockwell
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27-Oct-2006 10:55
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The results so far are seen to be lacklustre The drag on earning are the twin evils of depreciation and the escalating crude oil prices. These have been a drag on earnings. The outlook is brighter now that oil prices which have retreated from their recent highs. Optimistically lower oil prices will mean lower costs and higher margins and increasing earnings at the bottom line. A sanguine outlook on depreciation is that increasing charges as the result of capacity expansion last of which was 3 startups in 2005. Going forward it should plateau. What stands out is earnings have stood up well. The earnings for 2005 were flat due to a 38% increase in tax as a 50% tax relief for one of the subsidiaries expired in 2004. On the operating level profit has increased. With the twin evils out of the way margins are set to quicken upward as utilisation rate increase and volume growth riding on the growth of Pepsi and Coke. Nothing exciting but a bread-and-butter business set to grow say 10% going forward and drive earnings higher. |
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Gallen
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18-Mar-2006 14:40
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Extracted from my blog http://kelongstocks.blogspot.com Please visit my blog for full writeup. Do remember to support my blog, thank you in advance! Fundamental Analysis Unlike some analysts who keep changing their views to accommodate price movements, I am sticking to my forecasts and 12-month target price for Full Apex unless there are adverse developments in its P/L over the next few months. Don't want to repeat what I posted previously so please refer to http://kelongstocks.blogspot.com/20...5606032081.html for previous writeup. ...... continued at my blog |
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Gallen
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18-Mar-2006 14:39
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kelvin, simi analysis very kelong??? |
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kelvin
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18-Mar-2006 00:44
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your analysis very kelong leh?! |
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Gallen
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18-Mar-2006 00:25
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Extracted from my blog http://kelongstocks.blogspot.com Please visit my blog for full writeup. Do remember to support my blog :) Had a couple of requests for this counter so decided to do another coverage since my last posting on this counter on 26 Feb after it posted its results. In my earlier posting after its results release, I wrote "The stock has since corrected back to around 35 to 36.5 cents in recent days. At 36.5 cents, downside appears to be limited. EMA 50 and EMA 200 are at 35.7 cents and should lend support. EMA 100 is at 34.9 cents. From the chart, you can also see a minor uptrend line with support at around 35.5 cents and also a horizontal support line (support turned resistance turned support again) at 35 cents." How wrong I was as 28 Feb proved to be a weak day for China stocks which generally underwent an across the board correction (see prices for China Sky, China Sun, Celestial and you will understand why). Full Apex was not spared and posting flat results led to heavy selling (prices actually opened higher to hit 37.5 but ended the day at 35 cents). The breaking of the key supports (EMA 50, EMA 200) mentioned above and the bearish engulfing candlestick was an ominous bearish signal. The 35 cents support mentioned above held for 5 more trading days before prices closed at 34.5 cents (cut loss point as all significant supports broken) although volume was low on that day indicating that maybe most of the selling was already done. Prices continued declining to a intra-day low of 31.5 cents before rebounding to close at 32 cents on higher volume. Prices managed to break out from the short term downtrend line (purple line) to close with a doji at 33.5 cents today. Supports: 33 cents (resistance turned support - swap many times already), 30.5 to 31.5 cents (recent supports during late Nov and late Dec 2005) Resistances: 34.5 cents (support turned resistance), 34.7 to 35.3 cents (EMA 50, EMA 100 and EMA 200). Stop Loss: If buy at 33.5 cents or above, cut if close below 33 cents, if buy near 30.5 to 31.5 cents, cut below 30.5 cents. The EMA 50, EMA 100 and EMA 200 would present a formidable resistance for now, unless prices can break convincing above these resistances, no new short term uptrend can be confirmed. |
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