Saturday, 8 February 2020
Corrugated packaging companies are having a good time recently, as we can see from the share price trend of Master-Pack and PPHB.
In the third quarter of 2019, both companies released wonderful financial results with significant jump in bottom lines.
Both attributed this to better margin or lower manufacturing cost or better cost control. Someone says that the raw material price (paper?) has dropped which probably is the case but I'm not too sure whether it remains low now.
Master's net profit margin increases from 6% to 10%, while net profit margin of PPHB shot up from 10% to 19% in FY19Q3. Personally I hope this trend to sustain for a while, but for how long?
While Master has successfully ventured into Vietnam, PPHB has diversified into hotel business.
Prior to this, PPHB has already involved in property investment through JV. If not mistaken, those properties are CMART Nibong Tebal and the surrounding shoplots.
Its hotel operation is located at a very strategic area in Georgetown UNESCO World Heritage site (Church Street Ghaut) within walking distance to ferry terminal and famous historical sites there.
The 162-room 4-star hotel is called "The Prestige" and was just launched in Jun 2019.
From its FY19Q2 quarterly report, the hotel division registered PBT loss of RM1.4mil from RM211k of revenue, as it has just started operation for one month.
It's a bit surprise to me that it manage to break even in its subsequent quarter of FY19Q3, with revenue of RM2.15mil and PBT of RM112k.
FY19Q4 is peak season for travel and hotels, so I'd expect it to perform better in this period.
At the moment The Prestige has received lots of positive ratings from travelers who stayed there. It is rated above 9 out of 10 in average from almost all the online hotel booking sites.
Hotel business is not expected to contribute tremendously to PPHB's bottom line. If it doesn't make loss continuously, then it is already good.
Some shareholders may not even like this diversification as the money can be used to grow the core business with perhaps better return.
Nevertheless, I still expect it to make RM1mil net profit per quarter.