Stock Picks: Tri-Pack Films Limited

Tri-Pack Films Limited is a public limited company and a joint venture between Mitsubishi Corporation of Japan and Packages Limited of Pakistan and in the business of manufacturing packaging films. It began its operations in 1993 and since then has expanded its operations greatly producing different types of high quality films.

Tri-pack has seen consistent growth in sales over the past 5 years with high quality of earnings depicting an average net profit margin of 8% year on year basis resulting in returns on equity outperforming the market for the last 5 years at an average of 35%.

The company has depicted strong gross and operating profit margins highlighting the competitive strength of the company through ability to maintain prices and control costs.

The risk profile of the company seems high at 1.8x debt over equity but this is mitigated by the fact that the company is rated as A+ for the long term and hence enjoys lower rates of interest having a positive impact on net profitability.

The earnings and dividend yields are attractive too being higher than the risk free rate of approx. 13% and minimum savings rate of 5% respectively.

 

 

Tri-Pack is under going expansion and has ordered state of the art equipment from the German company Brucker. This expansion initiative will enable the company to not only cater to the increasing domestic demand but also expand to foreign markets. The opportunities that accompany tapping into foreign markets serve as positive predictions for the future position of Tri-Pack Limited.

Taking the above into accounts the trailing P/E multiple of 6x and P/BV multiple of 2x seems very attractive especially considering the growth prospects of the company.