#jntstudynotes
ASIAPLY
WILL 20Q3 EARNINGS SKYROCKET?
THE ONLY ONE
Asia Poly is the only listed Malaysian manufacturer of cast acrylic sheets.
ALREADY-EXISTING APPLICATIONS: MANY
Acrylic sheets are widely used across various industries, ranging from food to transport, building, and medical industries.
NEWLY-EXISTING APPLICATIONS: SOCIAL DISTANCING, ORDER VOLUMES INCREASE
The Covid-19 pandemic has presented a new application for acrylic
sheets. The requirement for social distancing measures has seen greater
adoption of acrylic for table partitions, face shields and shield boxes.
ASIAPLY has received a very encouraging orders from new customers
from USA and Europe. This has allowed them to gain access to the one of
the world largest acrylic consumer market. With the emergence of the new
application of the acrylic sheet in social distancing and prolong trade
war, ASIAPLY expects orders from these two continents continue to grow
moving forward.
EMERGING APPLICATIONS: AUTOMOTIVE.
Beyond Covid-19, ASIAPLY is eyeing another segment with growth
potential in the automotive export markets. The adoption of acrylic in
automotive is growing as manufacturers aim to make cars as lightweight
as possible.
GREATER EFFICIENCIES & ECONOMY OF SCALE
As result from the higher sales orders, ASIAPLY expects factory
utilization rate to rise in the coming quarters, resulting in greater
efficiency and deduction in production cost.
AGGRESSIVE CAPACITY EXPANSION
Given that both ASIAPLY's production lines are currently running at
full capacity, the group plans to add a third production line by June
2021. The third production line, which is expected to run at full
capacity in September 2021, will effectively increase Asia Poly’s
manufacturing capacity to 1,600 tonnes per month.
PRIVATE PLACEMENT AT 41.5 SEN
This could be the entry cost of certain prominent investors.
BUSINESS RISKS
ASIAPLY's business risks include drop is
order volumes, reduction in ASP, rise of raw material costs (MMA) and
operational ineffiencies.
SO, WILL 20Q3 EARNINGS SKYROCKET? WE THINK SO
Based on ASIAPLY's news and management commentary, skyrocket earnings
can be anticipated. Surge in order volume and improvement of efficiency
as well as profit margins. However, if you look at ASIAPLY's quarterly
results, you will notice that the skyrocket of earnings in 20Q2, has not
taken place.
Our guess is, the skyrocket of earnings, would take place in this coming quarter.
ASIAPLY made an earnings of RM1.6 million in 19Q4. That was a 'pre-COVID' core earnings.
With surging order volumes, higher ASP and improving efficiencies, it is not impossible for ASIAPLY to achieve 2-3x earnings.
If you recall, ASP of Supermax (Glove players with the highest ASP
increase due to their own brand gloves) boosted its earnings and share
price by multiples in from March to August this year. This is because
all ASP increment directly contributes to bottom line.
This is why...
We believe ASIAPLY stands a chance to achieve 2.5x of 19Q4 earnings, that is around RM4 million earnings, or more.
Going forward, how would ASIAPLY's share price move?
Let's let Mr. Market decide.
DISCLAIMER
Our study notes are for sharing purpose only. We could be inaccurate. Valuation perspective is beyond scope. There is no buy/sell recommendation.
#jntstudynotes
https://klse.i3investor.com/blogs/jomnterry/2020-10-22-story-h1534768639-ASIAPLY_WILL_20Q3_EARNINGS_SKYROCKET.jsp
