Many investors will be familiar with blue-chip global packaging giant Amcor Limited (ASX: AMC) which commands a market capitalisation of nearly $16 billion.
Investors are likely to be much less familiar with Pact Group Holdings Ltd (ASX: PGH). There are a couple of reasons for this, including its smaller size of just $1.5 billion in market capitalisation and also its relatively limited life as a listed company – Pact's initial public offering (IPO) occurred in December 2013.
Given Pact Group's share price has rallied around 50% since its IPO compared with a near 20% lift in the shares of Amcor and just a 1.4% increase in the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO), arguably the stock should be on the radar of more investors.
While there is no doubting the market leading status of Amcor, arguably the smaller, niche packaging status of Pact Group provides faster growth potential. Here are five reasons to add Pact Group to your watch list…
- Largest rigid plastics packaging manufacturer in Australasia (producing products such as plastic milk and laundry detergent containers) with 70 operating sites across 7 countries with a growing Asian presence
- Strengthening balance sheet with net debt declining 22% to $440 million
- Strong profit growth with underlying net profit after tax up 43% to $85 million in FY 2015
- A number of defensive characteristics thanks to scale and diversity by both products and customers
- Growth potential due to Asian region exposure
Growth at a reasonable price
According to analyst estimates, over the next two financial years Amcor is forecast to grow earnings per share (EPS) by 0.2% and 6%. In comparison, Pact Group is forecast to grow EPS at a rate of 42% and 11% respectively.
Obviously the earnings growth rate of Pact Group would appear far more appealing.
Importantly, if these forecasts prove accurate, then it implies that Pact Group is trading on forward price-to-earnings (PE) multiple of just 13 times compared with a PE multiple of nearly 17 times for Amcor. That arguably makes Pact Group appealing on both a relative and absolute valuation basis.
