AMVIG Holdings 澳科控股: Company Analysis Part II
Laminated paper
& laser film segment produces the raw materials needed for the
cigarette packaging printing. Its contribution in terms of revenue and
operating profit to the group is quite small.
Thus, the
breadwinner is still the cigarette package printing segment. One thing
to note is that the declining trend of its profit margin as a result of
the tendering system implemented by the tobacco group since few years
ago while revenue kept going up albeit a dropped in year 2010 after
disposal of Brilliant Circle group.
Throughout the
years, the group able to restructure its product range and keep its
focus on high-mid end products which carries higher gross profit margin
at around 34% which is almost double of the other 2 lower end products.
In 2013,72% of
the cigarette packaging customers are from High-Mid End class and the
top five largest customers accounted for approximately 89% of the total
sales.
The major
shareholder is Amcor Limited who is involved in a lot of packaging
business for different applications. Back in June 2008, Amcor subscribed
78 mils shares at HKD8.94 each to raise HKD699 millions. Amcor Limited
is listed in Australian Stock Exchange Limited,
There are few institutional funds currently owning substantial ownership in the group too.
On the management
side, Mr Chan Sai Wai and Mr Ng Sai Kit who are siblings and also the
executive directors of the group taking a significant but not
substantial amount of ownership in the group.
Mr Ge Su who is the
CEO of the group taking a mere 0.13% ownership. He has more than 20
years experience in the Chinese tobacco industry. He also participated
in many tobacco related projects and also developed a good working
relationship with the tobacco monopoly authorities both at central and
provincial levels. But why so tiny ownership?
Thus, the total ownership by Amcor Limited, investment funds and management is close to 83%. Not much liquidity in my opinion.
For the half year
ended FY2014, the group's performance was not so good. Revenue and net
profit also dropped compared to last year. Higher gross profit margin
but lower operating profit margin caused its net profit margin dropped
too.
Higher operating
expenses was due to weakening of Renminbi against HK dollars that caused
an exchange loss of HKD35.2 millions compared to exchange gain of
HKD14.7 million last year. By minus out the exchange losses, the core
operating cost did reduce little bit from last year.
Nothing much special on the balance sheet while its cash flow statement only showed the summary.
Due to the strong
balance sheet and cash flow, the group declared 2 special dividends
total of HKD37.1 cents on top of usual HKD8.2 cents interim dividends
for current year.
China National
Tobacco Corporation (CNTC) is playing an important role for the
packaging industry. It's a state-owned manufacturer of tobacco products
and also the world's largest manufacturer of tobacco products by
revenues.
Together with State
Tobacco Monopoly Administration, they are responsible for the monopoly
management of tobacco products and the operation of production, sales,
materials, import and export business in relation to tobacco products in
PRC.
According to some
articles, Marlboro remains the most popular cigarette in the world, but
China brands taking 7 of the top 10 brads, including Red Pagoda Mountain
and Double Happiness.
One thing to note
is that the cigarette in China is largely opaque monopoly. It blocked
competition from Western tobacco markets by limiting imports or domestic
production by foreign companies. So, their products are mainly consumed
locally and the tobacco industry accounts for about 7 percent of the
state's revenue yearly.
The tobacco industry in China seems like a stable industry and it's quite defensive.
Perhaps, the packaging player for tobacco worth to take a look especially during economic downturn?
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