Malaysia: Packaging Stocks – Can You Trade Their Good Fortunes?

Making hay while the sun shines

According to an article in the The Edge Malaysia dated 6 July 2020, during and in the aftermath of the Covid-19 pandemic, consumers are now turning back to a product which they have previously tried to reduce. Fearing the spread of the coronavirus, vendors and consumers are now turning once again to plastic packaging.

It is not surprising that analysts now see better prospects ahead for plastic packaging companies. Demand is projected to rise as economic activities resume now that nearly all restrictions have been lifted from most sectors of the economy.

In addition, lower oil prices are expected to result in lower raw material costs for the players in the sector. There is also an increase in demand for packaging products from the food and beverage industry as many consumers are now inclined to order in rather than dining out to avoid the crowds.

The rise in e-commerce is another factor boosting demand for plastic packaging.

The good thing for stock market players is that analysts reckon the valuation for most players appear to be still at reasonable levels, supported in part by the anticipated rise in demand for their products and lower crude oil prices.

Another analyst quoted in the article says that with the USD/MYR trend still hovering above RM4/USD, which is still decent for earnings, while lower oil prices will benefit the cost structure of plastic packaging players as the plastic resin is the main raw material for plastic companies.

Many plastic packaging stocks have moved up but none as high as another sector, the rubber glove manufacturers, which also benefitted directly from the shift in customer demand for their products in the ongoing Covid-19 pandemic.



PEG Corporate Finance and Research view:

It appears that investors have yet to catch on to a theme play in this sector as much as the rubber glove sector, possibly due to the packaging sector having an indirect benefit in the supply chain rather than having a direct benefit like rubber gloves or PPE products.

Despite these, a second wave of a rise in Covid-19 cases in US and Europe and a shift back in consumer preference towards hygiene (conditions or practices conducive to maintaining health and preventing disease, especially through cleanliness) and new social habits like takeways rather than dine-in could see a rise back in demand for packaging products like plastic or even paper packaging.

With plastic packaging companies continuously tapping new markets, such as China, the US, Canada and Africa, and working on more niche products to improve margins, most of them have embarked on bullish capacity expansion plans, which should accrete over the longer run.

It was previously reported that Tomypak is increasing its capacity by 89% by FY2020-21, SLP by 58% by FY2019, and SCGM by 65% by FY2020. Thong Guan is targeting a 10% to 15% expansion.

Traders should watch players in the sector and a very easy way of tracking their share price is through the use of scientific algorithm to monitor their trend and momentum.

As an elite trader, you should always be the first to enter or re-enter the trend and the first to exit once the trend is over. Don’t be caught holding “abandoned darlings” for years.

Using our calculated proprietary algorithm, here is the outlook for the main plastic packaging players. The algorithm is calculation-intensive and dynamic and will change as proprietary indicators like price, volume, time, etc in the share price changes.

The exact composition of the algorithm and their application is the proprietary asset of our affiliate partner, Bulls and Bears Research.

We are monitoring one interesting player in the sector which appears poised to lead the sector in any breakout. The key level we would enter is as indicated in the table below.

We would buy as soon as the share price breaks out from the key level shown. Don’t make your trading hard by tracking 20-30 indicators on your stock chart and listening all over the place to unnecessary friends, media news, tipsters, rumours, etc.

Using our Key Level and Cycle strategy, we would be able to estimate the project projection of this stock should it breakout to the upside automatically.

That is all an elite trader need to focus on in trading i.e. to enter, put a risk-management stop level and exit with a profit at the optimum level each time and knowing these in advance at every point in time of the trade.

All other information would just be unnecessary noises and distraction to the trade.

Knowing just these simple indicators and price levels in advance will make your trading a breeze and enable you to manage your risk-reward level efficiently and allow you to save one precious commodity that most traders just do not have, which is time.



Most traders spend so much time analysing. monitoring and tracking that they are exhausted from trading all the time and simply do not know enjoy trading after all.

Narrow your trading to just knowing the key levels in advance and save your time for other more memorable things in your life, and not for staying glued to your market screen and second guessing or getting freak out at each price movement.

Do not be mistaken however. Extensive calculations and mathematics are involved in our algorithm but you should let machines and coding do the work.

They never tired out like humans and will never ever complain. And the best thing is —- machine-calculated algorithms if designed and applied correctly can be very accurate.

But that’s just from our experience and works on our proprietary algorithms.

 







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Certain information has been redacted and the full content is restricted to PEG Holdings clients, shareholders, fund management entities, and any affiliates or business partners approved by PEG Holdings only. You can register your interest and personal log-in here.

The content in the Research and Market section are only for general market information and should not be construed as an investment advice or constitute a recommendation to buy, hold or sell any instruments or markets. The information represents our personal view only and is for educational and general purposes only.

You should consult with your licensed investment adviser before attempting any real-life trading or investments in the marketplace. All information provided can change without notice and is not guaranteed for accuracy and completeness and is not for use by the general public. Please view the full disclaimer and terms and conditions notice here.

Please note that all algorithms calculated are dynamic and will change as prices, volume and other proprietary factors etc. move in real time.  All information pertaining to any technical or algorithm content are the proprietary assets of our affiliate partner, Bulls and Bears Research.

For more information on the algorithm, please contact our Corporate Finance and Research unit at:


Steven Liew
Head of Strategy
stevenliew@pegroupholding.com

Albert Ting
Head of Corporate Finance
albertting@pegroupholding.com

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