NTPM (FV RM0.55 - NEUTRAL) 9MFY12 Results Review: All is Well

Stock Name: NTPM
Company Name: NTPM HOLDINGS BHD

Research House: OSK

Price Call: HOLD

Target Price: 0.55

NTPM'sresults were in line with our forecasts, constituting 78.8% of our full-year estimates.Revenue inched up 5.8% y-o-y, mainly bolstered by stronger sales of personalcare and paper products. Nonetheless, net profit contracted by 18.5% owing tohigher raw materials and operating costs, while EBIT margin was 3.6 pct ptslower at 13.7%. Maintain NEUTRAL, with a higher FV of RM0.55, as we roll over ourvaluation to FY13 based on a PER of 13x.

Higher revenue from product sales. NTPM's 9MFY12 revenueimproved by 5.8% y-oy from RM315.8m to RM334.2m, mainly boosted by robustgrowth in personal care products (+22.1%) and paper products (+2.6%). Thehigher sales of baby diapers contributed to the growth in personal care productrevenue while the improved  demand fortissue products in the domestic market underpinned growth in the paper product segment.Despite the higher topline, the group's net profit slipped 18.5% y-o-y on the backof higher raw material prices as well as staff and utility expenses. Vis-''-vis 1QFY12,revenue and earnings were higher by 4.9% and 53.2% owing to the better EBITmargin.

EBIT margin eases. The EBIT margin continued to moderate by 3.6% to 13.7% y-o-y, nothanks to higher pure and recycled pulp prices, as well as higher staffexpenses and utility cost. As a result, the company's 9MFY12 earnings droppedfrom RM40.5m to RM33m y-o-y. However, on a q-o-q basis, EBIT margin improved to16.4% from 12.2% due to the lower cost of materials compared with that in thepreceding quarter. We expect margins to improve further on the back of lowerpulp prices and the recent upward adjustment in selling prices for NTPM's babydiaper products.

To pay interim dividend. The group has declared aninterim single-tier dividend of 1.45 sen for the quarter under review to rewardits shareholders.

Maintain NEUTRAL. We are leaving our forecasts unchanged as the company's results werewithin our expectations. Nevertheless, we are bumping up our FV to RM0.55 from RM0.48previously as we roll over our valuation from FY12 to FY13.

Source: OSK188