Is Greatview Aseptic Packaging Company Limited Undervalued Right Now?

Greatview Aseptic Packaging Company Limited (Greatview) offers an integrated packaging solutions, which include provision of aseptic packaging materials and filling machines, to the liquid food industry. Greatview is the second largest roll- fed supplier of the world and the leading alternative supplier in China.

As of 17 May 2019, Greatview is worth HK$ 6.34 billion in market capitalisation. In this article, I’ll bring an update on its latest financial results, future plans and valuation figues.

Here are 14 major things to know about Greatview before you invest.

• Production Capacity
  Greatview has three plants located at Shandong and Inner Mongolia in China and at Halle in Germany with a combined production capacity of 25.4 billion packs per annum in 2018. It is an increase from 13.4 billion packs per annum in 2011. It is attributed to the commencement of the factory operation at Halle, Germany in 2013 and its expansion in 2017.
  
  
  

Source: Greatview’s Annual Reports

• Sales Volume
  As a result, Greatview has achieved higher group sales volume, up from 7.7 billion packs in 2011 to 13.5 billion packs in 2018. It had maintained a 50 – 55% in capacity utilisation rate.
  
  
  

Source: Greatview’s Annual Reports

• Geographical Revenues:
  Apart from domestic sales, Greatview exports its packaging products to 40+ nations worldwide. Its breakdown in sales for 2018 is as follows:
  
  

Geographical Sales	Revenues 2018 (RMB Million)	Revenues 2018 (%)
China (Domestic)	1,599	64.1%
International	894	35.9%
Greatview (Total)	2,493	100.0%

Source: Greatview’s Annual Report 2018

• Segment 1: China
  Domestic sales remained as the main income contributor to Greatview.
  It has recorded a small and gradual fall in revenue since 2013, dropping from RMB 1.86 billion in 2013 to RMB 1.60 billion in 2018. Its drop was caused by a fall in both sales volume and sales prices during the period.
  
  
  

Source: Greatview’s Annual Reports

• Segment 2: International
  International sales is the main growth driver for Greatview. Sales grown from RMB 134.1 million in 2011 to RMB 894.0 million in 2018. Its rise in sales was contributed by expansion of its factory at Halle, Germany and continuous sales order received from international markets for the past 8 years.
  
  
  

Source: Greatview’s Annual Reports

• Group Financial Results
  Combined, Greatview had achieved growth in group revenues, up from RMB 1.57 billion in 2011 to RMB 2.49 billion in 2018. This is because its sales growth from international markets had outweighed its small drop in domestic revenues during the period. This, in turn, had led to growth in shareholders’ earnings, up from RMB 263.1 million in 2011 to as high as RMB 360.1 million in 2018. Greatview has 8-Year Return On Equity of 14.91% per annum for the last 8 years. This means, it has generated, on average, RMB 14.91 in earnings a year from every RMB 100 in equity in that 8-year period.
  
  
  

Source: Greatview’s Annual Reports

• Cash Flows Management
  From 2011 to 2018, Greatview generated a total of RMB 2.85 billion in operating cash flows, RMB 64.8 million in interest income, and raised a total of RMB 126.2 million in net equity and long-term borrowings. Out of which, it has spent:
  
  – RMB 1.59 billion in net capital expenditures (CAPEX).
  – RMB 1.48 billion in dividends to its existing shareholders.
  
  
  Greatview had grown its cash reserves from RMB 253.9 million in 2011 to RMB 556.4 million in 2018. Evidently, Greatview is a cash-cow and is capable of funding both its operation & expansion activities and sustain dividend payments to its shareholders without much reliance of debt & equity.
  
  
  

Source: Greatview’s Annual Reports

• Balance Sheet Strength
  As of 31 December 2018, Greatview has non-current liabilities of RMB 119.5 million and shareholders’ equity of RMB 2.44 billion. Hence, the company has a gearing ratio of 4.90%. In addition, it has current assets of RMB 1.79 billion and current liabilities of RMB 661.6 million. Hence, its current ratio is 2.71.
  
  
  
• Major Shareholders
  As of 31 December 2018, Greatview’s five major shareholders and their amount of shareholdings are as followed:
  
  

Major Shareholders	Shareholdings (%)
Hong Gang	6.04%
Jeff Bi (Bi Hua)	9.65%
JSH Venture Holdings Ltd	28.21%
Janus Henderson Group Plc	6.04%
Prudential Plc	4.99%

Source: Greatview’s Annual Report 2018

Hong Gang is appointed as the Chairman of Greatview. Jeff Bi runs the company as its CEO. Both are co-founders of Greatview.

JSH Venture Holdings Ltd is 100%-owned by Jardine Strategic Holdings Ltd (JSHL). Jardine Matheson Holdings Ltd (JMHL), which owns 83.63% stake in JSHL, is also included as a key shareholder of Greatview.

• Recent Acquisition
  As of 28 March 2019, Greatview has completed its recent acquisition of Qingdao Likang Food Packaging Technology Company Ltd (Likang) for as much as RMB 104.2 million. Likang is involved in aseptic food packaging manufacturing in Shandong, China.
  
  
  
• Key Risk
  In 2018, Greatview derived 47% of its total sales from 1 main customer.
  Thus, it is reliant on the key customer for its future financial results and is subjected to the risk of concentration of 1 major customer.
  
  
  
• P/E Ratio
  As of 17 May 2019, Greatview is trading at HK$ 4.74 a share. In 2018, it has reported to make earnings per share (EPS) of HK$ 0.31. Thus, it has current P/E Ratio is 15.24, slightly above its 5-year average of 14.32.
  
  
  

• P/B Ratio
  As of 31 December 2018, Greatview has net assets of HK$ 2.10 a share. Hence, its current P/B Ratio is 2.26, which is above its 5-year average of 2.05.
  
  
  

• Dividend Yields
  In 2018, Greatview has reported dividends per share (DPS) of HK$ 0.27. Thus, its current dividend yield is 5.70% a year, above its 5-year average of 5.54% per annum.
  
  
  

VIA’s Verdict

Overall, Greatview has contributed slow but stable growth in revenues, profits, and dividend payments to its shareholders. Stock price of Greatview had been relatively choppy, ranging from HK$ 2.00 – HK$ 6.00. The price movements had not move in tandem with its financial results.

Source: Google Finance

Source: Greatview’s Annual Reports

As I write, it is trading at P/E Ratio of 15.24, P/B Ratio of 2.26, and would offer a dividend yield of 5.70% a year.

The question is: ‘Would you invest in Greatview at HK$ 4.74 per share?’

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