Tat Seng Packaging Group Ltd


It will just be a short write up today, but nevertheless still rich in content (cough).

Business Description

Tat Seng Packaging Group Ltd, together with its subsidiaries, manufactures and sells corrugated boards, corrugated cartons, and other packaging products in Singapore (16% of  FY15 revenue) and the People’s Republic of China (84%). Key client industries are printing (40% of FY15 revenue), medical (24%) and electronics (20%).

Valuations and Financials

Tat Seng has a market capitalisation of SGD61.3mn with a net cash of SGD17.6mn! Based on FY15 numbers, the company is currently trading at:

P/E: 4.8x

P/B: 0.6x

D/E: 0.2x

Dividend yield: 2.5%

Factor in the net cash position and these metric would be about 20% cheaper. Operations have remained stable in the past 5 years.

Tat Seng

What I like most is that the company has managed to compound book value (a measure of shareholder’s value) at 12.5% CAGR.

What I don’t like about the company

The business is not very free cash flow generative. FY15 FCF yield is around 40% but it was an anomaly. FCF between 2011-2014 have averaged around SGD1mn.

Trade receivables and trade payables are the biggest balance sheet items. I’m not sure if this is an industry trait, but what is worrying is that receivables have grown ahead of revenue. Between 2010 to 2015, receivables have almost doubled while revenue has only increased by 38%. This is definitely not a good sign.

Final words

China will clearly be the main driver of profits going forward. Unfortunately, I don’t have much insight regarding the outlook of China packaging. Nevertheless, given its cheap valuations, Tat Seng is definitely a worthy consideration for any value portfolio. The bottom line would be – is the margin of safety sufficient for the discomfort of its receivables growth?

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Tee Leng is the co-founder and co-editor of ValueEdge. His investment articles have been published on ValueWalk, NextInsights and TheFinance.sg. Tee Leng is also the investment director of TwinPeak Capital, a private family office with 7 figures under advisement. Additionally, Tee Leng is the Director of NCK Global Capital and is a frequent guest speaker at institutions such as University College London (UCL) and at investment seminars held in Singapore.


  1. I used to work in a corrugated plant and was a direct competitors about 30 years ago. The industries has no moat. The main competitative age is price and delivery turnaround time. One way to make more money is to time the purchase of paper stock which is a major cost component. This is the low end of the technology industries with silkscreen printing of larger corrugated boxes. It is the barometer for manufacturing activities of the country. If manufacturing is down, you can be sure corrugated carton requirement will reduce accordingly. You cannot product goods without first ordering the packaging material first. If receivables is increasing, it means that manufacturing is down and its customers are having cash flow problem.

    • Thank you for sharing Steve and I fully agree about what you have said. I think its interesting thought that Tat Seng has managed to grow sales (and in China no less) where the economy has been slowing down in recent years. I have to admit though, that I have not looked very deeply into Tat Seng. I just wanted to flag it out because the valuations caught my eye.

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