Many investors will be familiar with the $17 billion packaging giant Amcor Limited (ASX: AMC) and Amcor's shareholders at least will also be familiar with the recent $2.8 billion Orora Ltd (ASX: ORA) spin-off.
Both Amcor and Orora exhibit positive long-term fundamentals thanks to their operations across the packaging industry both in Australia and overseas. There is another company however which is less well followed but that also provides exposure to the same industry dynamics…
Pact Group Holdings Ltd (ASX: PGH) listed on the ASX in late December 2013 with its share price enjoying a 36% rise since first trading. The company is now priced at around $1.4 billion, however there could still be more growth ahead for this stock which has links to the Pratt family-owned Visy Group.
Here are four reasons to keep an eye on Pact Group:
- Pact is the largest manufacturer in Australasia of rigid plastics packaging with 62 manufacturing sites across 5 countries. This company's size provides a scale advantage against competitors.
- The company's products are used in a wide range of products many of which could be considered non-discretionary. This scenario helps provide Pact with a solid, defensive earnings stream.
- The group offers an appealing dividend. For the half-year ending December 2014, Pact paid a dividend on 9.5 cents per share (cps). One consensus forecast suggests the full year dividend will total 20 cps which implies a yield of 4.3%.
- The positive growth outlook for Pact is another reason to keep this stock on your watchlist. Looking out to 30 June 2016, according to data supplied by Morningstar, Pact should grow earnings per share by 11.7%.
Valuation
Based on an earnings forecast of 34.3 cps in 2016 the stock is available on a price-to-earnings (PE) ratio of 13.4x. This compares very favourably with the PE of the S&P/ASX 300 (Index: ^AXKO) (ASX: XKO) of 18.5x particularly when also considering the growth outlook of both Pact and the index average.
