HLG Research: Accumulate Tomypak, 6-month PT of RM1.65

HLG Research said Johor-based TOMYPAK HOLDINGS BHD []’s share price is ikely to stage a positive breakout after short term consolidation.

In its report issued on Tuesday, Sept 21, it recommended investors accumulate the shares with a six-month price target of RM1.65.

Tomypak is the 2nd largest flexible packaging materials (FPM) manufacturer company in Malaysia with a 25% market share, behind Daiboci’s 30-35%.

The research house said the recent flexible packaging materials companies 2Q10 results such as Daibochi and Tomypak were not positive, recording net profit decline of 16% and 33% on-quarter respectively, mainly due to continued rise in raw material costs.

“However, this should not be a major concern as Daibochi’s and Tomypak’s MNC customers review their prices every quarter for changes in raw materials and forex,” it said.

On the technical price chart, HLG Research said after peaking at 52-week high of RM1.55 on July 28, Tomypak’s share price formed a triangle consolidation. However, there are signs of impending breakout above the DTL, supported by MFI and MACD gaining strength.

Tomypak has found its temporary low at RM1.20 following share split and bonus issue and is still gyrating in an uptrend channel, indicating that the recovery trend is still intact.

“We expect Tomypak to breach the DTL resistance around RM1.42 (76.4% FR from the top of RM1.55 and low of RM1) after undergoing a brief consolidation amid toppish slow stochastics. Upon further breakout, upside resistance are situated around RM1.55-RM1.65 zone.

“We see this as a low-risk buy but always put a stop below RM1.20. Our 3-month technical target is RM1.65, implying a 7.1 times FY11 P/E (about 10% discounts to Daiboci),” it said.