The Pro-Pac Packaging Ltd (ASX: PPG) share price is charging higher today on the back of a trading update and manufacturing site consolidation plans. At the time of writing, Pro-Pac Packaging shares are sitting 8.57% higher for the day at 19 cents per share after being up by as much as 14.29% in early trade.

About Pro-Pac Packaging

Pro-Pac is an international packaging company that operates a distribution and manufacturing network throughout Australia, New Zealand, and Canada.

The company supplies a combination of product and service solutions for primary, secondary, and tertiary packaging for most industry segments. Its vast product range includes flexible films, plastic bottles, gloves, cleaning supplies, and signs.

Pro-Pac was established in 1987 and has been listed on the ASX since 2005.

Why is the Pro-Pac Packaging share price spiking?

This morning, Pro-Pac provided an update on its expected results for the year ending 30 June 2020.

According to the ASX release, trading has been better than expected in the COVID-19 environment. Accordingly, the company expects full-year earnings before interest, tax, depreciation and amortisation (EBITDA) of around $30 million, before significant items. For context, Pro-Pac achieved a $28.1 million EBITDA result in FY19, and a $16.3 million result in the financial year before that.

Additionally, Pro-Pac has continued to target working capital improvements. As a result, it expects its net debt position at 30 June 2020 to be around $60 million. This is down from $82.9 million at 30 June 2019.

Optimisation of manufacturing footprint

In addition to the trading update, Pro-Pac also announced that it will relocate production from its Chester Hill facility in Sydney.

The transition, which is expected to be completed by March 2021, includes the transfer of manufacturing volume from the Chester Hill factory to the company’s other facilities in Sydney, Melbourne, Adelaide and Perth. This is to optimise Pro-Pac’s manufacturing footprint and expand its service offering in an effort to reduce its cost base and grow profitability.

According to the company, central to this initiative is the investment in a new 7-layer extruder and laminator. This piece of equipment will provide new capacity and capability for growth with existing customers, and also support expansion into new markets.

The closure of the Chester Hill facility will involve capital investment of around $7 million and one-off costs of approximately $12.6 million – incurred over the next 2 years. The project will be funded from cash reserves and existing committed banking facilities, and is expected to result in annualised benefits of around $7 million from FY22.

Commenting on today’s update, CEO Tim Welsh said:

Leveraging our existing resources and obtaining the best possible returns on our investments, is an important priority. The consolidation [of facilities] will ensure our Flexibles division remains a leader in the delivery of flexible packaging products and services, for all of the critical markets we serve. The move will also optimise our other sites and enable the business to focus on innovation and growth.

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Motley Fool contributor Cathryn Goh has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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An IPO (or Initial Public Offering) can be an exciting event on the ASX, or any other share market for that matter. That’s because it involves the process of a private company becoming public, with its shares trading on the stock exchange for the first time.

Normally, most investors are locked out of investing in private companies because the shares aren’t publicly traded on a market.

But an IPO ‘democratises’ a company by allowing it to be accessible for the first time to any investor with money to spare. Thus, it’s always an exciting event with a lot of ‘buzz’ when a company goes public for the first time.

All listed companies underwent some kind of IPO in their history. This is the case whether relating to recent listings like Splitit Ltd (ASX: SPT) or those that occurred over a century ago, like Washington H. Soul Pattinson and Co. Ltd (ASX: SOL).

Some big names that have IPOed on the ASX in the last 5 years include Splitit, as well as Viva Energy Group Ltd (ASX: VEA), Marley Spoon AG (ASX: MMM) and Elixinol Global Ltd (ASX: EXL).

Over in the United States, there are some bigger names you might have heard of that recently had IPOs. These include Uber Technologies Inc (NASDAQ: UBER), which floated just last year, along with Beyond Meat Inc (NASDAQ: BYND). These were very exciting events that generated a lot of investor interest.

Should you invest in IPOs?

Just because you can invest in something, it doesn’t necessarily mean you should. Investors often get swept up in the hype of an IPO. But here’s why I think investing in one usually isn’t a good idea for the average investor.

When a company is private, it is subject to far less scrutiny than a public company. Even after a private company becomes public, it can sometimes take years for all of the company’s skeletons to come out of the closet.

What’s more, you don’t get a chance to see how a company is actually weighed up by the market until after the IPO occurs. This can result in the shares being quickly re-valued.

Thus, a company can believe its own shares are worth $10 each and, as such, offers them at its IPO for $10. But if the market has a different opinion, you might find the shares trading at $7 or $5 each very quickly.

Boom, you’ve just lost 30% or more of your money on day one.

Foolish takeaway

In my experience, losing money on an IPO happens more often than not. Therefore, I generally think it’s preferable to wait until after a company has floated to buy in. That way, you can ensure you are buying its shares at the market price, rather than at a price the company has concocted. Too often, IPOs are done to let old investors out, not to let new investors in. Thus, I think all investors should be very careful with IPOs and be sure to have a cold shower before jumping in.

More reading

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• 2 quality ASX shares to buy for long-term growth

Sebastian Bowen owns shares of Uber Technologies and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Uber Technologies. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Commonwealth Bank of Australia (ASX: CBA) share price is rapidly rising. It’s currently up around 5% right now. It’s now up around 9% from the start of the week.

It’s not just the CBA share price which is rising rapidly. Today alone the Westpac Banking Corp (ASX: WBC) share price is up 9%, the Australia and New Zealand Banking Group (ASX: ANZ) share price is up 9% and the National Australia Bank Ltd (ASX: NAB) share price is up 8.8%.

This is one of the best days ever for the major ASX banks if they hold onto these gains.

The error with the jobkeeper total cost is good news in the sense that far less people are requiring support than previously expected. So perhaps that means the economy won’t be hit as hard as previously expected?

With a share price fall from around $90, investors were obviously expecting a really painful downturn for CBA. But clearly the news is getting better with restrictions lifting and people getting out and about again.

Is it time to buy the CBA share price?

So far CBA has provisioned $1.5 billion for COVID-19 impacts. Not much in the grand scheme of CBA’s overall loan book. If that’s all the damage is going to be then the CBA share price could seem pretty cheap.

But I don’t think it’s all rosy just yet. In Australia there are question marks for at least the tourism and construction sectors.

The US and China could each individually cause major problems for the entire world if there’s a new trade war. The coronavirus continues to spread at an alarming rate in the US. And who knows what the US election will throw up?

If you’ve been waiting to buy CBA shares then I think now could be the time to do it – everything is looking like it’s on an upward trend. But I’m not sure the dividend will remain as high. Profits could fall if the net interest margin (NIM) declines.

More reading

• ASX 200 up 0.1%: Big four banks rocket, Afterpay sinks lower
• Why the NAB share price is surging higher today
• Why ALS, Metcash, NAB, & Pointsbet shares are racing higher
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Soaring share price: Is CBA a buy? appeared first on Motley Fool Australia.

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