Highlights

M+ Online Research Articles

Author: MalaccaSecurities   |   Latest post: Fri, 18 Jun 2021, 10:03 AM

 

Teo Seng Capital Berhad - Another subdued quarter

Author:   |    Publish date:


Summary

  • Teo Seng Capital Bhd’s (Teo Seng) 1QFY21 net loss stood at RM0.8m, vs. a net profit of RM1.9m recorded in the previous corresponding quarter due to lower contribution from the animal health products segment on the back of lower demand, and higher feed production cost, coupled with increased depreciation cost.
  • The reported net profit came below our expectation, registering losses in contrast to our previous estimated net profit of RM32.1m. Meanwhile, the reported revenue amounted to 20.5% of our previous revenue forecast of RM562.7m for the year.
  • On average, the chicken egg price dropped by 3.8% YoY in 1Q2021 to average of RM0.27 per egg, dragged by lower demand amid Covid-19 pandemic. Despite the weaker ASP of chicken eggs, the group registered flattish revenue YoY in the poultry farming segment. Revenue for the quarter contracted 0.5% YoY to RM115.5m.
  • Cost wise, soybean prices maintained its upward momentum in 1Q2021, rising 22.6% QoQ due to climate change and huge import from China. Likewise, the maize price climbed 13.6% QoQ on the back of sharp rise in demand which led to poor availability on the market. Nevertheless, 1QFY21 saw narrowed losses QoQ due to the improved QoQ ASP of chicken eggs (4Q20: 23.0 sen) and the disposal gain on fixed assets, offsetting the higher feed price.
  • Considering the reimplementation of Movement Control Order (MCO) following resurgence of Covid-19 daily confirmed cases, coupled with the persistently rising feed commodity prices, the uncertainties in the market may continue to exist over the near term. We reckon the chicken egg prices will linger around RM0.30 per Grade C chicken egg whilst the poultry players’ expansion plans were deferred amid intermittent outbreak of Covid-19 waves could help avoid a potential oversupply.
  • In view of the uncertainties in the market amid MCO, Teo Seng has put off some of the projects under their initial expansion plan, targeting production of at least 4.5m chicken eggs per day by end-2022 instead of the earlier expectation of 5.0m (current production at 4.0m chicken eggs per day). However, we reckon the challenging situation to be normalise later in the year when the pandemic is under control following the ongoing vaccination programme.

Valuation & Recommendation

  • Considering the deferment of some projects under the expansion plan, we have reduced our FY21f and FY22f forecasted earnings to RM25.5m and 36.3m respectively. We downgrade Teo Seng capital to SELL (from HOLD), with a revised target price of RM0.69. We arrive our target price by ascribing a target PER of 8.0x to its FY21f EPS of 8.7 sen.
  • Outlook wise, despite part of its expansion plan was halted due to the pandemic outbreak, the company remained committed in increasing production, targeting to boost its chicken eggs production to 4.5m daily by end-2022. Should the vaccination programme being rolled out smoothly and lead to reopening of business activities, the industry should improve by 2022 in tandem with the company’s expansion plan.
  • Risks to our recommendation include low ASP of chicken eggs amid imposition of stricter movement restrictions following renewed spike in Covid-19 cases, as well as higher chicken feed costs (mainly soybean and maize) due to growing global export demand, which may eventually lower its margin.

Source: Mplus Research - 10 May 2021

Share this
Labels: TEOSENG

Related Stocks

Chart Stock Name Last Change Volume 
TEOSENG 0.77 0.00 (0.00%) 88,800 

  Be the first to like this.
 


APPS
I3 Messenger
Individual or Group chat with anyone on I3investor
MQ Trader
Stock Screener using Technical and Fundamental criteria
MQ Affiliate
Join the MQ Affiliate Program today to earn rewards
 
 

572  344  555 

ActiveGainersLosers
Top 10 Active Counters
 NameLastChange 
 FINTEC 0.035+0.005 
 MMAG 0.185-0.005 
 VSOLAR 0.02+0.005 
 EURO 1.10-0.11 
 MTOUCHE 0.090.00 
 SERBADK 0.625-0.005 
 HHHCORP 0.190.00 
 MRDIY 3.900.00 
 FOCUS 0.04+0.005 
 EDARAN 1.17+0.265 

FEATURED POSTS

1. MQ Trader - Introduction to MQ Trader Affiliate Program MQ Trader Announcement!

TOP ARTICLES

1. What Professor Dennis Etler said about China - Koon Yew Yin Koon Yew Yin's Blog
2. Why China is excluded in G7 summit? Koon Yew Yin Koon Yew Yin's Blog
3. AT Current Share Price: RM0.07. 1st Target Price: RM0.134, 2nd Target Price: RM0.28, 3rd Target Price: RM0.80 Fundamental Analysis of AT(0072) as at June 17 2021
4. UNCOMMON ACTIVITIES SPOTTED ON RECENT CORPORATE EXERCISE OF THIS COMPANY!! Swim With Sharks
5. Singapore sees first day rush for Sinovac vaccine; as 16 Covid-19 cases announced on Friday (June 18) Good Articles to Share
6. Serba Dinamik rombak struktur Lembaga Pengarah, lantik IIlyas Pakeer sebagai pengerusi Oil and Gas Malaysia News
7. [MUST READ] Important message for all investors who are planning to invest in AT or existing AT shareholders Important message for all investors who are planning to invest in AT or existing AT shareholders
8. SMetric (0203): A secured technical buy? - 17 June 2021 - Sujibaby Sujibaby Stock-Talk
PARTNERS & BROKERS