Paper Money

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Tat Seng Packaging Group (TSP) was established in 1968 and listed in SGX on 2001. Hanwell Holdings became the major shareholder of the TSP in 2005. The company manufacture and sells corrugated paper packaging products to the electrical, electronic, food, pharmaceutical industries.

Two plants in Singapore are located at Tuas and Senoko. Five plants in China are located at Suzhou, Nantong Rugao, Nantong Tongzhou, Hefei Anhui and Tianjin.

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85% of sales are from China and 15% from Singapore.

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Business

Business revenue have been growing steadily through the years. Gross margin range bound between 17.9% ~ 22.6% averaging 20% last ten years. There appear to be some margin weakness from 2017. Chinese government Waste Import Ban policy is pressuring operating margin.

Net profit and margin grew despite GM softening through operating cost reduction from average 13.4% (2012~2016) to 11.2% (2017~2021).

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Balance sheet is relatively healthy but debt have increased substantially since 2017.

Feb-21 proposal to spin-off Tat Seng Suzhou was called off in Aug-21 due to Covid-19 and unattractive market condition. A successful spin-off would have helped TSH reduce short-term debt.

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Opinion

A simple business with steady earning. Management disciplined in cost control. Inflation, rising material-labour cost and pandemic regulations compliance is likely to pressure gross margin.

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Recent lock-down in major cities in China could have an impact on business in 2022. Investment in productivity all sites may negate some of these headwind. Industry consolidation could potentially enables TSH to gain market share.