Tat Seng Packaging Group: A Hidden Gem in the Packaging Industry

Tat Seng Packaging Group (SGX:T12) has been a standout performer in the packaging industry, delivering a compound annual growth rate (CAGR) of 15% for its shareholders over the last five years. This impressive track record can be attributed to the company's strategic expansion into Mainland China, strategic acquisitions, and strong cash flow management. Let's delve into these factors to understand why Tat Seng Packaging Group has been a winning investment.



Expansion into Mainland China

Tat Seng Packaging Group's expansion into Mainland China has been a significant driver of its growth. In 2009, the company acquired Nantong Hengcheng Paper Industry Co. Ltd, which contributed to a substantial increase in its revenues. Since then, Tat Seng has achieved a CAGR of 12.6% and 17.0% in sales and earnings, respectively. Revenues grew from S$ 111.4 million in 2010 to S$ 288.3 million in 2018, while earnings rose from S$ 8.5 million in 2010 to S$ 29.9 million in 2018. This expansion has been a key factor in Tat Seng's overall growth and success.



Strategic Acquisitions

Tat Seng Packaging Group's strategic acquisitions have played a crucial role in its growth. In 2018, the company acquired a 50-Year Leasehold Land measuring 35,000 sqm at Nantong, Mainland China for S$ 4.53 million. The company subsequently set up a new factory on this land and began operations in 2019. Additionally, in 2019, Tat Seng entered into an agreement to purchase a piece of leasehold land measuring 7,647 sqm in Hefei, China for S$ 0.74 million. These acquisitions have allowed Tat Seng to expand its operations, increase its production capacity, and grow its market share in Mainland China.



Cash Flow Management

Tat Seng Packaging Group has demonstrated a strong track record in cash flow management and capital expenditure (CAPEX) strategy. From 2009 to 2018, the company generated approximately S$ 115.2 million in operating cash flows and raised an additional S$ 64.0 million in borrowings. During this period, Tat Seng chose to allocate a substantial portion of its cash proceeds towards net capital expenditures, amounting to S$ 104.2 million. This strategic investment in CAPEX has allowed the company to expand its operations, improve its production capabilities, and drive its growth in revenues and earnings.

Conclusion

Tat Seng Packaging Group's expansion into Mainland China, strategic acquisitions, and strong cash flow management have been key factors in its impressive growth over the past five years. The company's ability to generate positive cash flows, invest in CAPEX, and maintain a strong balance sheet has enabled it to create value for its shareholders. As Tat Seng continues to expand its operations and invest in its future, it remains a compelling investment opportunity in the packaging industry.