• 2QFY14 results within expectations
• Progress with new accounts on track
• Maintain BUY

2QFY14 results within expectations

Revenue and PATMI for 2QFY14 met our expectations by increasing 9.8% YoY to US$50.9m and 12.0% to US$12.5m respectively. 1HFY14 revenue at US$103.0m forms 99.9% and 49.1% of our 1HFY14 and FY14 forecasts respectively. Correspondingly, 1HFY14 PATMI at US$26.4m forms 100.4% and 49.0% of our 1HFY14 and FY14 forecasts. We think that Goodpack is on track to meeting our forecasts for FY14, given that Goodpack typically has a stronger 4Q. Operating expenses rose 10.3% to US$34.5m, which we judge to be largely in tandem with topline growth. For 1HFY14, depreciation and amortization expense rose 15.1% to US$9.9m while other operating expenses rose 22.2% to US$13.0m due to acquisition and leasing of more IBCs. As management has previously guided that they only acquire more IBCs upon demand confirmation, we think this is a positive leading indicator for the next two quarters.

Progress with new accounts on track

In our previous report titled “A promising 2014” on 5 Feb-14, we put forth the investment thesis that new synthetic rubber (SR) clients will be the growth driver for FY14/15, while scaling up by trial-stage and acquisition of new auto parts accounts will contribute more prominently from 2QFY15 onwards. We maintain this thesis as Goodpack’s progress is on track. Goodpack acquired a new SR client in China and also three new auto parts clients to start off with trials. We expect new SR client to ramp up in the coming two to three quarters given Goodpack’s track record with SR producers. Though we do not expect scaling up by auto parts clients till a year later, the acquisition of new on-trial auto parts clients is a healthy sign of their receptiveness in switching over. It also provides the indirect benefit of prompting other suppliers to take a closer look at what Goodpack has to offer.

Maintain BUY

We believe Goodpack’s growth story is on track and maintain our BUY call with a DCF based fair value of S$2.17.

Source: OCBC Research - 17 Feb 2014