Good Pack

Good Pack: OCBC draw investors’ attention back to fundamentals as speculation about possible share offer for Goodpack wanes. Since our last BUY call in Feb-14, the share price has gained 15%. We keep our fair value estimate of $2.17 intact and downgrade to a HOLD. Acknowledge that Goodpack continues to hold compelling value propositions: its global presence and ~20% cost savings over alternatives. There are also barriers to entry from IBC design patent, stickiness of existing clients, and large capex spending. Believe Goodpack is among the top choices for any new synthetic rubber (SR) plant, as exemplified by Goodpack being the supplier for Singapore’s new SR plants, including the latest Sumitomo Chemical plant opened in Mar-14. Further catalysts for rerating could be 1) current trial-stage auto parts manufacturers switching over fully to IBCs before 2QFY15 as assumed in our base case, and 2) another upside risk is higher-than-expected demand from rubber industry.