SCG Packaging IPO - Unexciting - Recent growth will taper off
SCG Packaging (SCGP) aims to raise around US$1.3bn in its Thailand IPO. It is a part of the SCG group.SCGP is a packaging solutions provider in ASEAN offering fiber-based packaging, performance and polymer packaging, food service products, design, printing and other solutions. SCGP is the largest packaging paper and corrugated containers producer in ASEAN, as per Frost & Sullivan.
SCGP has been steadily increasing its exposure to the packaging segment via acquiring smaller competitors across ASEAN. Its efforts appear to be paying off as EBITDA and PATMI margins bottomed in 2016 and have been improving since.
However, its asset growth has been running ahead of earnings growth for most of the prior years. Since its operating cash flows haven’t been enough to cover its capex needs and acquisition expenses in most of the past few years, this has led to a rise in leverage.
Furthermore, a look at its recent financials indicate that most of the growth has been owing to its recent Indonesian acquisition.
Our previous coverage of the IPO:
SCG Packaging Pre-IPO - Shift to packaging has been aiding margins but acquisitions have driven up leverage
The Siam Cement Public Company Limited is a Thailand-based holding company engaged in the industrial supplies and construction industries. The Company and its subsidiaries operate four business segments: SCG Cement-Building Materials segment, which is the manufacture and sale of grey cement, ready-mixed concrete, white cement, dry mortar, roof tiles, concrete paving blocks, ceramic tiles, sanitary wares and sanitary fitting; SCG chemicals segment, which is the manufacture and sale of olefins, polyolefins and other chemical products; SCG packaging segment, which is the manufacture and sale of pulp, printing and writing paper, gypsum linerboard, corrugated boxes and securities document, and other segment, which is the joint investment with other companies in agricultural machines, automotive parts and components, as well as other services.
Aequitas Research is a leading ECM research firm with a focus on IPOs and placements/follow-on offerings across the Asia Pacific with deal size of over USD100m.
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