THE current rebound in car sales should see improved prospects for Oceancash Pacific Bhd in the second half of 2020 (2H20), as the company is boosted by its insulation and hygiene segments.
“Oceancash is currently firing up insulation production to meet pent-up demand from a rebound in car sales, after the lockdown eased and the announcement on the sales tax exemption on cars by the government,” said Affin Hwang Capital analyst Brian Yeoh.
Yeoh also believes that potential new car launches, such as the facelifted Perodua Myvi and the Proton X50 in 2H20, will be a boon to felt manufacturers like Oceancash as well.
At the same time, the company’s felt production facility in Thailand has also been completed since June. However, the plan to reallocate one of its Indonesian production lines there is currently on hold due to Covid-19 travel restrictions, leading to a delay in commercial production to the first quarter of 2021.
The hygiene segment of the company, which produces higher grade non-woven products largely used as absorbent layers for diapers and sanitary pads, should see a boost.
“We also anticipate earnings recovery for Oceancash’s hygiene segment from the gradual ramp-up in production of non-woven products. Management guided that the orders from a key customer that was secured in late-2019 remained robust, and Oceancash had also received additional orders from abroad due to disruptions faced by its former supply chain, caused by the Covid-19 pandemic,” said Yeoh.
The analyst noted that there exists the possibility that the company could venture into the production of personal protective equipment (PPE).
Affin Hwang Capital maintained a hold call on Oceancash, with an unchanged target price of 61 sen. The research house believes this valuation to be fair, citing solid recovery prospects in 2H20 and the subsequent better earnings expansion heading into 2021.
At 11.37am, Oceancash’s shares were last done at a static 62.5 sen, with 1.97 million shares traded. – July 20, 2020
