Goodpack

Goodpack: DBSV note that after a slow 2H13, Goodpack’s volume growth momentum is set to accelerate from 1Q14, underpinned by additional demand of: 1) 15k boxes /month from new synthetic rubber (SR) customer, Sibur in Russia; and 2) 8-9k boxes/month from newly commenced SR plants of Lanxess and Asahi in Singapore. This lays the ground for 8-10% vol growth in FY14. In addition, Goodpack stands to benefit from the lower handling and logistic costs on its global tender exercise and leasing cost after the buyback of 300k leased boxes in FY13. Goodpack’s share price has corrected by 21% from its YTD high of $1.91 in early March against the backdrop of slow recovery in US/Europe and fear of slowdown in China’s economic activities, which would affect global rubber demand. The tide is changing for Goodpack in the light of improving rubber demand and as contributions from new SR contracts in Singapore and Russia kick in as well as the growing autopart segment. Given that fundamentals are intact, the overhang in the stock created by the selldown of a substantial shareholder should not be a cause for concern but is a window of opportunity for long term investors to accumulate Goodpack. Besides, Goodpack should not be affected by any potential rate hikes as 90% of its debts are fixed rate. On the back of brighter prospects and 25% potential upside to $1.90 TP, house upgrade Goodpack to BUY. The finalisation of autopart contracts is an imminent catalyst.