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See important disclosures at the end of this report Powered by EFATMPlatform 1

Company Update, 16 January 2014

NTPM (NTPM MK) Take Profit (from Buy)Consumer Non-cyclical - Household & Personal Products Target Price: MYR0.82

Market Cap: USD290m Price: MYR0.85

Taking a Break After Strong Rally

Macro

Risks

Growth

Value

89

99

109

119

129

139

149

159

169

179

189

0.40

0.45

0.50

0.55

0.60

0.65

0.70

0.75

0.80

0.85

0.90

NTPM (NTPM MK)Price Close Relative to FTSE Bursa Malaysia KLCI Index (RHS)

5

10

15

20

25

30

Jan-13

Ma

r-13

May-13

Ju

l-13

Sep-13

Nov-13

Volm

Source: Bloomberg

Avg Turnover (MYR/USD) 0.56m/0.17m

Cons. Upside (%) -3.5

Upside (%) -3.8

52-wk Price low/high (MYR) 0.45 - 0.87

Free float (%) 30

Shareholders (%)

Lee See Jin 29.6

Teoh Boon Beng 18.0

Lee Chong Choon 11.9

Shariah compliant

Ngo Siew Teng+603 9207 7660

[email protected]

Forecasts and Valuations Apr-11 Apr-12 Apr-13 Apr-14F Apr-15F

Total turnover (MYRm) 420 450 481 533 590

Reported net profit (MYRm) 52.1 44.8 49.1 53.4 59.2

Recurring net profit (MYRm) 52.1 44.8 49.1 53.4 59.2

Recurring net profit growth (%) (12.2) (14.0) 9.7 8.8 10.9

Recurring EPS (MYR) 0.05 0.04 0.04 0.05 0.05

DPS (MYR) 0.03 0.01 0.03 0.03 0.03

Recurring P/E (x) 18.3 21.3 19.4 17.9 16.1

P/B (x) 3.84 3.37 3.08 2.83 2.62

P/CF (x) 20.5 21.5 12.7 15.1 12.0

Dividend Yield (%) 3.4 1.7 3.4 3.4 3.4

EV/EBITDA (x) 11.2 12.1 10.9 9.6 8.7Return on average equity (%) 21.8 16.8 16.6 16.5 16.9

Net debt to equity (%) 20.1 26.8 27.1 19.4 19.0

Our vs consensus EPS (%) 0.0 0.0

Source: Company data, RHB estimates

NTPMs share price has rallied strongly and outperformed the FBM

KLCI index by some 93.6% y-o-y. As we adjust our earnings to factor inthe additional cost from the power tariff hike, we also revise down ourFV to MYR0.82 from MYR0.87. Since the stock has appreciated sharplyand breached our FV, we downgrade our call to TAKE PROFIT andsuggest that investors accumulate at a lower level.

Sharp rise. Our Top Pick NTPMs share price has risen to MYR0.85 from MYR0.46, as of yesterdays closing. This indicates a whoppingcapital gain of 84.8% and total y-o-y return of 106.2%, outperforming theFBM KLCI index by 93.6%. The stocks P/E, which has surged to ~18xcurrently vs ~12x a year ago, is similar to that of its peers, eg KimberlyClark (KMB US, NR)s18.5x.

Factoring in impact from power tariff hike. Utilities costs usually makeup ~8% of the cost of goods sold (COGS). We expect costs to increaseby MYR300k-400k per month due to the recent power tariff hike effectivefrom 1 Jan 2014. As NTPMsmanagement is not planning to pass on theextra cost to end-consumers, we are trimming our FY14-15 earningsslightly by 3-6% to factor in the impact. The group hopes to capture moremarket share by maintaining its productsselling prices. To date, NTPM

is still the leader in the tissue paper market with a >50% share.

Vietnam expansion on track. Its new plant in Vietnam is on schedule tobe completed by March 2014, with machinery expected to be installed byJune 2014. The plant, which is set to commence operation by Sept 2014,will produce 30 tonnes of tissue a day. This will boost the groups totalproduction capacity to 345 tonnes/day from 315 tonnes/day.

Downgrade to TAKE PROFIT. After revising our numbers, our FV isadjusted lower to MYR0.82 from MYR0.87, pegged to a 15.5x P/E ofFY15 EPS. The target P/E is at a 15% discount to the 18.3x weightedaverage P/E of its regional peers. We downgrade the stock to TAKEPROFIT, due to the recent share price rally, and advise investors toaccumulate at a lower level in the future. NTPM is currently trading

above +2SD from its historical mean.

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NTPM(NTPM MK)16 January 2014

See important disclosures at the end of this report 2

Figure 1: NTPMs P/E band

Source: Bloomberg

Figure 2: Assumptions

FY14 FY15

Total capacity (per annum) 115k tonnes 121.4k tonnes

Utilisation rate 65% 62%

Source: RHB estimates

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Financial Exhibits

Profit & Loss (MYRm) Apr-11 Apr-12 Apr-13 Apr-14F Apr-15F

Total turnover 420 450 481 533 590

Cost of sales (283) (315) (329) (363) (403)

Gross profit 137 134 151 171 187

Gen & admin expenses (2) (3) (4) (5) (5)

Selling expenses (21) (23) (26) (29) (32)

Other operating costs (45) (46) (50) (60) (65)

Operating profit 69 63 72 76 85

Operating EBITDA 90 85 95 107 118

Depreciation of fixed assets (21) (22) (23) (30) (33)

Amortisation of intangible assets (0) (0) - - -

Operating EBIT 69 63 72 76 85

Interest income 0 - - - -

Interest expense (2) (3) (4) (5) (6)

Pre-tax profit 67 60 67 71 79

Taxation (15) (15) (18) (18) (20)

Profit after tax & minorities 52 45 49 53 59

Reported net profit 52 45 49 53 59Recurring net profit 52 45 49 53 59


Cash flow (MYRm) Apr-11 Apr-12 Apr-13 Apr-14F Apr-15F

Operating profit 69 63 72 76 85

Depreciation & amortisation 21 22 23 30 33

Change in working capital (24) (24) (0) (33) (21)

Other operating cash flow (11) - (6)

Operating cash flow 66 62 84 74 91

Interest received (0) (0) - - -

Interest paid - - (8) (10) (12)

Tax paid (19) (17) - - -Cash flow from operations 47 44 75 63 79

Capex (39) (37) (50) (50) (50)

Other investing cash flow 0 (4) (15) 21 1

Cash flow from investing activities (38) (41) (65) (29) (49)

Dividends paid (33) (33) (33) (32) (32)

Increase in debt 40 27 15 (29) 13

Other financing cash flow (0) (0) 11 10 (13)

Cash flow from financing activities 8 (5) (7) (51) (32)

Cash at beginning of period 12 27 25 31 21

Total cash generated 16 (2) 3 (16) (1)

Implied cash at end of period 27 25 28 15 20


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Financial Exhibits

Balance Sheet (MYRm) Apr-11 Apr-12 Apr-13 Apr-14F Apr-15F

Total cash and equivalents 27 25 31 21 31

Inventories 87 93 94 127 141

Accounts receivable 78 75 79 80 89

Other current assets 0 19 20 - -

Total current assets 192 212 224 228 261

Tangible fixed assets 208 247 273 292 307

Intangible assets 1 5 20 (0) (0)

Total other assets 1 0 0 - -

Total non-current assets 209 252 294 292 307

Total assets 400 464 518 520 568

Short-term debt 68 66 94 67 80

Accounts payable 54 58 67 73 81

Other current liabilities 1 1 2 2 2

Total current liabilities 123 124 162 141 163

Total long-term debt 9 35 22 20 20

Other liabilities 19 21 23 21 21

Total non-current liabilities 28 56 45 41 41Total liabilities 152 181 207 182 204

Share capital 112 112 112 112 112

Retained earnings reserve 136 171 204 225 252

Other reserves (0) (0) (6) - -

Shareholders' equity 249 283 310 337 364

Total equity 249 283 310 337 364

Total liabilities & equity 400 464 518 520 568


Key Ratios (MYR) Apr-11 Apr-12 Apr-13 Apr-14F Apr-15F

Revenue growth (%) 9.7 7.0 6.9 11.0 10.7

Operating profit growth (%) (9.3) (9.1) 13.5 6.9 11.1

Net profit growth (%) (12.2) (14.0) 9.7 8.8 10.9

EPS growth (%) (12.2) (14.0) 9.7 8.8 10.9

Bv per share growth (%) 8.9 13.9 9.6 8.7 7.9

Operating margin (%) 16.5 14.0 14.9 14.3 14.4

Net profit margin (%) 12.4 10.0 10.2 10.0 10.0

Return on average assets (%) 14.1 10.4 10.0 10.3 10.9

Return on average equity (%) 21.8 16.8 16.6 16.5 16.9

Net debt to equity (%) 20.1 26.8 27.1 19.4 19.0

DPS 0.03 0.01 0.03 0.03 0.03

Recurrent cash flow per share 0.04 0.04 0.07 0.06 0.07


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SWOT Analysis

Market leader in tissue paper products

Owns good brand names, eg Premier, Royal Gold

Entry of bigcompetitors

Volatilecommodityprices

Venturing intoVietnam bysetting up anew plant

Impact from the minimum wage policy

Shortage of skilled labour

-20%

-13%

-6%

1%

8%

15%

0.0

5.0

10.0

15.0

20.0

25.0

Jan-11

Jan-12

Jan-13

Jan-14

Jan-15

P/E (x) vs EPS growth

P/E (x) (lh s) EPS gro wth (rhs)

0%

3%

6%

8%

11%

14%

17%

19%

22%

25%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

Jan-11

Jan-12

Jan-13

Jan-14

Jan-15

P/BV (x) vs ROAE

P/B (x) ( lhs) Return on average equi ty ( rhs)

Source: Company data, RHB estimates Source: Company data, RHB estimates

Company ProfileNTPM is principally involved in the manufacture of tissue and personal care products.

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Recommendation Chart

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

Jan-09 Apr-10 Jul-11 Nov-12

Price Close

NR

0.5

5

0.5

5

0.6

9

0.6

9

0.7

3

0.8

7Recommendations & Target Price

Buy Neutral Sell TradingBuy

Take Prof it Not Rated

Source: RHB estimates, Bloomberg

Date Recommendation Target Price Price

2013-12-16 Buy 0.87 0.75

2013-10-04 Buy 0.73 0.67

2013-06-24 Buy 0.69 0.56

2013-06-11 Buy 0.69 0.54

2013-01-11 Buy 0.55 0.46

2012-08-08 Buy 0.55 0.48

2012-03-19 Neutral 0.55 0.52

Source: RHB estimates, Bloomberg

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RHB Guide to Investment Ratings

Buy:Share price may exceed 10% over the next 12 monthsTrading Buy:Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertainNeutral:Share price may fall within the range of +/- 10% over the next 12 monthsTake Profit:Target price has been attained. Look to accumulate at lower levelsSell:Share price may fall by more than 10% over the next 12 monthsNot Rated:Stock is not within regular research coverage

Disclosure & Disclaimer

All research is based on material compiled from data considered to be reliable at the time of writing, but RHB does not make any representation orwarranty, express or implied, as to its accuracy, completeness or correctness. No part of this report is to be construed as an offer or solicitation of an offerto transact any securities or financial instruments whether referred to herein or otherwise. This report is general in nature and has been prepared forinformation purposes only. It is intended for circulation to the clients of RHB and its related companies. Any recommendation contained in this report doesnot have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This report is for theinformation of addressees only and is not to be taken in substitution for the exercise of judgment by addressees, who should obtain separate legal orfinancial advice to independently evaluate the particular investments and strategies.

This report may further consist of, whether in whole or in part, summaries, research, compilations, extracts or analysis that has been prepared by RHBsstrategic, joint venture and/or business partners. No representation or warranty (express or implied) is given as to the accuracy or completeness of suchinformation and accordingly investors should make their own informed decisions before relying on the same.

RHB, its affiliates and related companies, their respective directors, associates, connected parties and/or employees may own or have positions in

securities of the company(ies) covered in this research report or any securities related thereto, and may from t ime to time add to, or dispose off, or may bematerially interested in any such securities. Further, RHB, its affiliates and related companies do and seek to do business with the company(ies) coveredin this research report and may from time to time act as market maker or have assumed an underwriting commitment in securities of such company(ies),may sell them or buy them from customers on a principal basis and may also perform or seek to perform significant investment banking, advisory orunderwriting services for or relating to such company(ies), as well as solicit such investment, advisory or other services from any entity mentioned in thisresearch report.

RHB and its employees and/or agents do not accept any liability, be it directly, indirectly or consequential losses, loss of profits or damages that may arisefrom any reliance based on this report or further communication given in relation to this report, including where such losses, loss of profits or damages arealleged to have arisen due to the contents of such report or communication being perceived as defamatory in nature.

The term RHB shall denote where applicable, the relevant entity distributing the report in the particular jurisdiction mentione d specifically herein belowand shall refer to RHB Research Institute Sdn Bhd, its holding company, affiliates, subsidiaries and re lated companies.

All Rights Reserved. This report is for the use of intended recipients only and may not be reproduced, distributed or published for any purpose without prior

consent of RHB and RHB accepts no liability whatsoever for the actions of third parties in this respect.

Malaysia

This report is published and distributed in Malaysia by RHB Research Institute Sdn Bhd (233327-M), Level 11, Tower One, RHB Centre, Jalan Tun Razak,50400 Kuala Lumpur, a wholly-owned subsidiary of RHB Investment Bank Berhad (RHBIB), which in turn is a wholly-owned subsidiary of RHB CapitalBerhad.

Singapore

This report is published and distributed in Singapore by DMG & Partners Research Pte Ltd (Reg. No. 200808705N), a wholly-owned subsidiary of DMG &Partners Securities Pte Ltd, a joint venture between Deutsche Asia Pacific Holdings Pte Ltd (a subsidiary of Deutsche Bank Group) and OSK InvestmentBank Berhad, Malaysia which have since merged into RHB Investment Bank Berhad (the merged entity is referred to as RHBIB , which in turn is a wholly-owned subsidiary of RHB Capital Berhad). DMG & Partners Securities Pte Ltd is a Member of the Singapore Exchange Securities Trading Limited. DMG &Partners Securities Pte Ltd may have received compensation from the company covered in this report for its corporate finance or its dealing activities; thisreport is therefore classified as a non-independent report.

As of 15 January 2014, DMG & Partners Securities Pte Ltd and its subsidiaries, including DMG & Partners Research Pte Ltd do not have proprietarypositions in the securities covered in this report, except for:a) -

As of 15 January 2014, none of the analysts who covered the securities in this report has an interest in such securities, except for:a) -

Special Distribution by RHB

Where the research report is produced by an RHB entity (excluding DMG & Partners Research Pte Ltd) and distributed in Singapore, it is only distributedto "Institutional Investors", "Expert Investors" or "Accredited Investors" as defined in the Securities and Futures Act, CAP. 289 of Singapore. If you are notan "Institutional Investor", "Expert Investor" or "Accredited Investor", this research report is not intended for you and you should disregard this researchreport in its entirety. In respect of any matters arising from, or in connection with this research report, you are to contact our Singapore Office, DMG &Partners Securities Pte Ltd

Hong Kong

This report is published and distributed in Hong Kong by RHB OSK Securities Hong Kong Lim ited (RHBSHK) (formerly known as OSK Securities HongKong Limited), a subsidiary of OSK Investment Bank Berhad, Malaysia which have since merged into RHB Investment Bank Berhad (the merged entity isreferred to as RHBIB), which in turn is a wholly-owned subsidiary of RHB Capital Berhad.

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RHBSHK, RHBIB and/or other affiliates may beneficially own a total of 1% or more of any class of common equity securities of the subject company.RHBSHK, RHBIB and/or other affiliates may, within the past 12 months, have received compensation and/or within the next 3 months seek to obtaincompensation for investment banking services from the subject company.

Risk Disclosure Statements

The prices of securities fluctuate, sometimes dramatically. The price of a security may move up or down, and may become valueless. It is as likely thatlosses will be incurred rather than profit made as a result of buying and selling securities. Past performance is not a guide to future performance. RHBSHKdoes not maintain a predetermined schedule for publication of research and will not necessarily update this report

Indonesia

This report is published and distributed in Indonesia by PT RHB OSK Securities Indonesia (formerly known as PT OSK Nusadana Securities Indonesia), asubsidiary of OSK Investment Bank Berhad, Malaysia, which have since merged into RHB Investment Bank Berhad, which in turn is a wholly-ownedsubsidiary of RHB Capital Berhad.

Thailand

This report is published and distributed in Thailand by RHB OSK Securities (Thailand) PCL (formerly known as OSK Securities (Thailand) PCL), asubsidiary of OSK Investment Bank Berhad, Malaysia, which have since merged into RHB Investment Bank Berhad, which in turn is a wholly-ownedsubsidiary of RHB Capital Berhad.

Other Jurisdictions

In any other jurisdictions, this report is intended to be distributed to qualified, accredited and professional investors, in compliance with the law andregulations of the jurisdictions.

Kuala Lumpur Hong Kong Singapore

Malaysia Research OfficeRHB Research Institute Sdn Bhd

Level 11, Tower One, RHB CentreJalan Tun Razak

Kuala LumpurMalaysia

Tel : +(60) 3 9280 2185Fax : +(60) 3 9284 8693

RHB OSK Securities Hong Kong Ltd. (formerly knownas OSK SecuritiesHong Kong Ltd.)

12thFloor

World-Wide House19 Des Voeux RoadCentral, Hong Kong

Tel : +(852) 2525 1118Fax : +(852) 2810 0908

DMG & PartnersSecurities Pte. Ltd.

10 Collyer Quay#09-08 Ocean Financial Centre

Singapore 049315Tel : +(65) 6533 1818Fax : +(65) 6532 6211

Jakarta Shanghai Phnom Penh

PT RHB OSK Securities Indonesia (formerly known asPT OSK Nusadana

Securities Indonesia)Plaza CIMB Niaga

14th FloorJl. Jend. Sudirman Kav.25

Jakarta Selatan 12920, IndonesiaTel : +(6221) 2598 6888Fax : +(6221) 2598 6777

RHB OSK (China) Investment Advisory Co. Ltd.(formerly known as OSK (China) Investment

Advisory Co. Ltd.)Suite 4005, CITIC Square1168 Nanjing West Road

Shanghai 20041China

Tel : +(8621) 6288 9611Fax : +(8621) 6288 9633

RHB OSK Indochina Securities Limited (formerlyknown as OSK Indochina Securities Limited)

No. 1-3, Street 271Sangkat Toeuk Thla, Khan Sen Sok

Phnom PenhCambodia

Tel: +(855) 23 969 161Fax: +(855) 23 969 171

Bangkok

RHB OSK Securities (Thailand) PCL (formerly knownas OSK Securities (Thailand) PCL)

10th Floor, Sathorn Square Office Tower98, North Sathorn Road,Silom

Bangrak, Bangkok 10500Thailand

Tel: +(66) 2 862 9999Fax : +(66) 2 108 0999

Thisareais for useby EFAandwillnot beshownwhenprintedTakeProfit Buy Downgrade| YES RHB estimates 0.82

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