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Equity Bottom-Up

Soft Australian trading conditions and heightened capital requirements led narrow-moat Pact Group to suspend its dividend in first-half fiscal 2019 and makes an equity raising now look imminent. Lost volumes in its Australian rigids business led us to reduce our full-year expectations by 5%. We now forecast fiscal 2019 EBITDA of AUD 230 million, in line with the lower bound of Pact’s recently revised guidance range. We lower our fair value estimate by 14% to AUD 4.20 per share on account of…

Weaker demand and input cost headwinds in the first half of fiscal 2019 led narrow-moat Pact Group to modestly downgrade full-year guidance. Pact now expects full-year fiscal 2019 EBITDA in the range of AUD 230 million to AUD 245 million. The midpoint of the updated range sits 2% below our full-year fiscal 2019 EBITDA forecast and 3% below Pact’s prior guidance provided in November. Pact Group also announced its first-half fiscal 2019 result and expects EBITDA of AUD 110 million. While a strong…

Concerns of oversupply in oil markets have markedly sent down oil futures and our near-term oil price forecast in recent months. Lower resin costs for narrow-moat Amcor and narrow-moat Pact Group are therefore anticipated over the coming five years. However, contractual arrangements with customers, where resin price volatility is passed through, means that revenue will also contract over the same period. While we revise our near-term top-line forecasts lower for Amcor and Pact Group, earnings…

Following three months of elevated oil price volatility, Pact Group has materially downgraded its fiscal 2019 EBITDA guidance to AUD 245 million from a prior range of AUD 270 million to AUD 285 million. Our fiscal 2019 EBIT forecast of AUD 173 million is now 8% above updated company guidance, reflecting our more optimistic outlook on resin prices and subsequently near-term margins. Furthermore, we remain confident previously announced cost-out initiatives will further support medium-term margin…

Narrow-moat Pact Group’s CEO Malcolm Bundey surprised the market by resigning after less than three years in the top job. Chairman and Pact founder Raphael Geminder has been appointed executive chairman until such time a new CEO is appointed. We maintain our AUD 4.90 per share fair value estimate and still expect 3.5% EPS growth to AUD 0.27 in fiscal 2019.
Analyst: Grant Slade, CFA

Australia

Pact Group Holdings Ltd manufactures packaging and other related products. The Company, through its subsidiaries, manufactures packaging and other products that service customers in the food, dairy, beverage, chemical, agricultural, industrial and other sectors throughout Australia, New Zealand and Asia.

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