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PACKAGING ISN’T the sexiest industry on the JSE. And when the industry “hunk” – Nampak – isn’t exactly a head-turner (although Allan Gray’s quite enamoured), you’ve got to wonder how many amorous glances are cast the way of modest little Transpaco. Although some will argue you need to stare really hard at a wallflower to find her less obvious charms, the beauty of Transpaco – at least to the wandering eye of Finweek – is very apparent.
Let’s start with the basics. Transpaco has a stout balance sheet, is cash flow generative, has strong management and operates in some rather specific packaging niches (some being areas where Nampak has thrown in the towel). Now for the specifics… Transpaco’s interim earnings to end-December 2010 came in at 125c/share on a diluted basis. Even if trading slows in the second half it should comfortably push through the 180c/share level for the full year.
That puts Transpaco on a conservative forward earnings multiple of 7,5 times – bearing in mind CEO Phil Abelheim has indicated the company is on track to deliver a “respectable performance” for the remainder of the year. Earnings are fully backed up by operational cash flow, which equates to a reassuring 125c/share. Gross margins are also solid at 39%, and although net margins slipped slightly to 12%, Transpaco will probably contain costs more effectively as new acquisition Disaki (incorporated for two months) is bedded down.
Transpaco’s major appeal for Finweek is as a potential yield sweetener. The company paid out a 29c/share dividend (last year: 25c/share). But we reckon the full year payout could be in the region of 70c/share – presuming the lightly geared Transpaco is happy to hold a two-and-half times dividend cover, which would offer investors a handsome forward yield of around 5%.
Let’s start with the basics. Transpaco has a stout balance sheet, is cash flow generative, has strong management and operates in some rather specific packaging niches (some being areas where Nampak has thrown in the towel). Now for the specifics… Transpaco’s interim earnings to end-December 2010 came in at 125c/share on a diluted basis. Even if trading slows in the second half it should comfortably push through the 180c/share level for the full year.
That puts Transpaco on a conservative forward earnings multiple of 7,5 times – bearing in mind CEO Phil Abelheim has indicated the company is on track to deliver a “respectable performance” for the remainder of the year. Earnings are fully backed up by operational cash flow, which equates to a reassuring 125c/share. Gross margins are also solid at 39%, and although net margins slipped slightly to 12%, Transpaco will probably contain costs more effectively as new acquisition Disaki (incorporated for two months) is bedded down.
Transpaco’s major appeal for Finweek is as a potential yield sweetener. The company paid out a 29c/share dividend (last year: 25c/share). But we reckon the full year payout could be in the region of 70c/share – presuming the lightly geared Transpaco is happy to hold a two-and-half times dividend cover, which would offer investors a handsome forward yield of around 5%.
