As it continues to notch up 52-week highs, investors finally recognize this as a growth stock. We have revised our price target to 60 cent, continuing to recommend a BUY.

Seasonally, the Apr-08 quarter is the weakest quarter in a year. Yet, revenues grew 28.7%YoY and were also up 3.9% QoQ on seasonally low sales volume. The reason is that sales in the Feb-Apr 08 months last year were affected by inflation taking a severe toll on consumer spending; hence 4Q-08 sales formed a low base for comparison. Operating profits rose 76.1% YoY and 10.3% QoQ. Operating profit margins improved sharply to record levels at 19.7% compared to 14.4% in 4Q-08, a weak quarter. NTPM’s raising of product prices by 15% in Jul-09 to offset rising costs proved fortuitous as material costs subsequently fell. Net rose a strong 76.2% YoY and also 22.1% QoQ.

Operating profit margins improved from a year ago due to recycled newsprint prices continuing to fall from depressed levels in preceding quarters. But a continuing fall in subsequent FY10 quarters is not imputed in our forward forecasts.

Higher working capital requirements in inventory costs and receivables boosted net gearing, which rose from 0.15x in Apr-08 to 0.158x in Apr-09 but this has eased from 0.20X in Jan-0-9 and is manageable.

FYE Apr010, sales are forecast to continue to climb at 11.9%, driven by the full year effect of the price increase and a marginal 4% volume gain. NTPM’s dividend yield is sustainable at 5.5% after the 4-for-5 bonus issue.

Recommendation

We have raised our forecast for FY EApr010 earnings to RM51.7m, also representing

+11.9% growth. Valuation remains undemanding at 8.7X PER. The share’s defensive quality comes from its retention of an astonishing stranglehold on the facial tissue market in the country with 70% market share, and the low price stature of the product. The share price has risen 70.4% in the YTD period, but the promised yield is still at least 5.5%, at our recommended threshold yield for income stocks, giving an anticipated 12-month total return of 28%.BUY.