Goodpack

Goodpack: HSBC initiates on Goodpack with a NEUTRAL rating and $2.15 TP, based on a DCF valuation. Goodpack owns the world’s largest fleet of steel intermediate bulk containers (IBCs); it has 2.9m units in total. IBCs are an environmentally friendly alternative to disposable packaging, such as wood pallets, paper cartons and single-use steel drums. Goodpack’s global network – spanning over 70 countries and more than 5,000 locations – gives it a strong competitive advantage. Long-term cost advantages, high exit barriers and a focus on core markets further strengthen the company’s competitive edge in the transport packaging industry. Goodpack’s share price is strongly correlated with world trade volumes and rubber consumption trends, which explains why it de-rated in 2011 when global rubber demand was depressed. The stock has rallied recently on the back of the modest recovery in rubber consumption levels. However, as it is trading close to a 12-month high of SGD1.95 and at a 17.9x 2014e PE, a c19% premium to its five-year historical mean, we believe the recent rerating has largely priced in the growth recovery and there is limited upside to the stock.