Woe is the packaging industry Can One, Bright Packaging.

A couple of stocks, has surprised me when I heard about their sharp increases in stock prices.  One is Can One, another is Bright Packaging.  They are both in the containment of business goods, or packaging.  I give credit to these companies as they have done well and increased revenues and dividends for their share holders.

But here in lies the problem.  For me these companies represent a good story.  The packaging industry is driven by the boom in demand for consumer goods across Asia.  People can easily pickup their product, an aluminium can, candy bar, or glass container,  and say "I'm invested in this, I know their product."

But do they really know it?  Aluminium isn't exactly a product that can only be made in Malaysia, so the lowest cost can be done elsewhere, same with packaging material.  If the profits are this good, it is expected competition will come in shortly.

Is the making of cans really done at the lowest cost in Malaysia?  Maybe, but it's easily replicable.  Kian Joo started off using former staff of Can One.  I also doubt it can't be done for a lower price and neighbouring Vietnam or Thailand.

The final icing on the cake is the ridiculous valuations.  It is a capital intensive business, so low price to Free cash flow multiples are needed.  Six times is good, but trading at 30x free cash flow for this type of business is insane.  Even at the current 16x free cash flow is overvaluing it.