KUALA LUMPUR (Nov 27): Shares of BP Plastics Holding Bhd (KL:BPPLAS) on Wednesday tested their lowest in more than nine months after the stretch films manufacturer reported weaker-than-expected third-quarter results.

BP Plastic fell as much as four sen or over 3% to RM1.17, its lowest since Feb 13, 2024. The stock ended the day at RM1.20, giving the company a market capitalisation of RM338 million. Trading volume totalled 240,300 shares, nearly 10 times the average of the past 20 days. 

“Outlook for the flexible plastic packaging industry remains challenging, given global economic uncertainties, elevated costs, and supply-demand imbalances,” said Public Investment Bank, one of only three research houses covering the stock.

The research house kept its ‘neutral’ call on the company that barely broke even in the third quarter while net profit for Jan-Sept period accounted for less than half of consensus full-year estimates.

Shares of BP Plastics have erased all of their gains in 2024 after falling more than 25% from this year’s peak in May amid concerns over demand for plastic packaging closely tied to global economic growth.  

Further, a sharp appreciation in the ringgit against the US dollar has also dragged on foreign proceeds for exporters such as BP Plastics that gets more than two-thirds of its sales from abroad.

There are two ‘hold’ and one ‘buy’ calls for BP Plastics. The consensus 12-month target price is RM1.41, according to Bloomberg.  

Kenanga Investment Bank, which has the stock on ‘outperform’ call, said the demand for plastic packaging is expected to grow slowly in the near term, noting that the low average selling prices from subdued resin costs also cause “a lack of urgency for buyers to stock up”.

Still, the research house is rooting for BP Plastics, flagging better orders with the launch of new products that carry higher margins while betting that its premium-grade stretch films will help cushion the impact of rising costs and would likely form more than 30% of sales over the next few years.

On Tuesday, BP Plastics reported that its net profit for the three months ended Sept 30, 2024 (3QFY2024) fell nearly 90% when compared to the same quarter last year. The company also declared dividend of 1.50 sen per share, even as earnings only amounted to 0.26 sen per share.

For the Jan-Sept period, net profit totalled RM16.94 million, down 33% when compared to the same period last year while revenue edged up 7.4% year-on-year to RM370.09 million.

On its part, the company said it remains optimistic of sustained and growing demand for packaging products as global economy activities continue to improve.