Talks of privatisation drives Public Packages trending higher

Public Packages Holdings Bhd (PPHB) has fared pretty well in the past year. It has gained 12% to close at 80 sen on April 19.

Interest in the manufacturer of corrugated cartons could stem from talks of possible privatisation exercise. When the privatisation talks first surfaced, PPHB had about RM140 million cash in hand. Assuming the controlling shareholders already has about 70% stake in the company collectively, they just need to fork out the cash for the remaining 30% (80 million shares).

Based on the current price, if they offer 10% premium to the last closing price of 80 sen, they only need to fork out some RM64 million to buy the remaining shares in PPHB. Essentially, the controlling shareholders can have access to the balance of some RM20 million since PPHB has about RM83 million cash balance as at Dec 31, 2023.

Furthermore, PPHB has been showing improved results. Its biggest revenue contributor, which is the manufacturing division, registered a drop in revenue in FY23.

The decreased sales performance was mainly due to low demand from customers and unfavorable product mix. However, its net profit rose to RM48.5 million in FY23 from RM38.5 million in the previous year. The better performance was primarily driven by its continuous cost controlled measures and enhancements in production efficiencies.

Additionally, improvement in hotel division and investment activities throughout the year contributed to the Group's overall performance. Furthermore, it benefited from an one-off gain resulting from fair value adjustment on joint venture investment properties.

PPHB also gained from higher interest/dividend rates offered by investment funds, and unrealised gain arising from foreign currency translation. The counter may see further upside as it rides on the positive sentiments.