In Vietnam, the plastic industry is forecasted to grow at 6.5% in the period of 2019-2024 with 4 areas: packaging, household appliances, construction and engineering.
Considering the growth potential of An Phat Bioplastics JSC , many securities companies believed that the current market price has not fully reflected its value, especially as comparing with industry peers.
Among a few plastic industry players listed on HOSE , An Phat BioPlastic JSC (HoSE: AAA) is considered as an “asset” of interest to investors. The profit of the company grew at CAGR of 21% for the past 5 years and is expected to increase by an average of 10-15% in the next 5 years. Thus research analysts believed that the current market price has not fully reflected its growth potential, especially as comparing with industry peers.
Recently, Mr. Nguyen Le Trung, CEO of An Phat Bioplastics JSC shared about the business results in 2019 and its activities in recent years.
– At this time, many investors are concerned about the business results of 2019 and the 2020 plan of An Phat Bioplastics JSC. What do you think regarding the performance of the company last year?
– Mr. Nguyen Le Trung: In the third quarter, the business results of An Phat Bioplastics JSC grew strongly compared to the same period last year. Specifically, net revenue reached VND 2,364 billion, up 8%, profit before tax reached VND 86 billion, up 49% on a yearly basis.
For 9 months, An Phat Bioplastics JSC reached VND 7,406 billion of revenue and VND 520 billion of profit before tax, equivalent to an increase of 28% and 174% over the same period last year. Due to the contribution of the industrial real estate segment and the manufacturing segment, the company had a pretax profit that doubled compared with the same period a year earlier. Of which, profit from core activities contributed 50 % of profit before tax, representing an increase of 35% over the same period in 2018.
Thus by the end third quater, we have achieved 85% of the annual profit plan and are likely to complete the business plan for 2019. This positive result was fueled by the change of market structure and product mix.
Currently we are working on 2020 plan, expecting core profits to grow at least 20% compared to 2018’s. In early January 2020 we will announce our business plan.
Ông Nguyễn Lê Trung, Tổng Giám đốc Nhựa An Phát Xanh
– What do you think about the price of AAA shares in the past year? AAA share price has not gone up even though the company’s business results are very positive.
– Mr. Nguyen Le Trung: 2019 is a successful year for the Board of Management of An Phat Bioplastics JSC as the profitability maintains strong growth, in which core business activities grew by over 40%. However, as a member of the Board of Directors, I find it unsuccessful when the market value of the company does not reflect the growth potential.
– Is that the reason for An Phat Holdings’ purchase of all the warrants of An Phat Bioplastics?
– Mr. Nguyen Le Trung: With the current profit as well as expected next year profit of An Phat Bioplastics JSC , P/E is less than 5x at the conversion price as well as the market price. Thus we see the purchase of all warrants issued by AAA in order to increase benefit to An Phat Holdings are obviously reasonable at this time. Considering a dividend of 15% of par value (or a dividend yield of over 10% pa) and return on investment of 20% (E/P = 20%), it is a profitable investment and creates value for An Phat Holdings.
Considering stable operation of factories, an increase of over 10% year on year in 2019 sales volumes, and the company’s plan to promote contribution from promising markets including the US and Japan, An Phat Bioplastics JSC will maintain optimal production level as well as reduce its dependence on EU market, facilitating sustainable growth in coming time.
Remarkably, thanks to the Group’s initiative in producing raw materials which aims towards developing a circulating economy model, member companies including An Phat Bioplastics JSC will gain great support and create further synergy fueling future growth.
– The Board of Directors has recently decided to stop the ESOP 2019. Could you tell us the reason?
– Mr. Nguyen Le Trung: We cancelled the ESOP in 2019. In the future, we will propose another more suitable program, such as stock option at a price higher than the book value of the company. Employees only exercise the right to buy when the stock price goes up and that will benefit the company’s shareholders. We think that the policy will be more in line with with shareholders’ interests than ESOP with purchase price at par value.
– What do you think about the prospect of An Phat Bioplastics JSC in the next 3-5 years?
– Mr. Nguyen Le Trung: Catching up the green consumption trend, An Phat Bioplastics JSC has invested to develop compostable products. Currently, our compostable bags account for approximately 10% of the product structure and are expected to increase sharply in the near future when An Phat Holdings’ PBAT production comes into operation. In Vietnam market, many big names like Highlands Coffee, The Coffee House, Vinpearl … have used our biodegradable bags and straws under AnEco brand. In the foreign markets, our top 20 major customers all indicated an increase in total biodegradable products in the near future.
The PBAT production will reduce AAA’s manufacturing costs by 30% compared to the current costs. In addition, An Phat Bioplastics JSC will be more independent in sourcing raw materials, improving inventory turnover and gross profit margin.
In the coming time, we will focus on increasing the proportion of compostable products in the output structure, improving the profit margin and prepare the market. An Phat Holdings’ investment in bioplastics manufacturer based in South Korea will help us secure raw materials at competitive price in the next 2 years before the Group will put the 20,000 ton PBAT factory into operation.
According to our projection, once the compostable packaging factory of An Phat Bioplastics JSC reaches 50% of utilization rate, the net profit can double.
