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PublicInvest Research

Author: PublicInvest   |   Latest post: Fri, 27 Nov 2020, 10:57 AM

 

QL Resources Berhad- Continues To Deliver Strong Growth

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QL Resources’ (QL) 4QFY20 net profit was flat at RM43m (-0.7% YoY) as higher finance cost and lower contribution from Palm Oil Activities (POA) segment offset higher contribution from Marine Products Manufacturing (MPM) and Integrated Livestock Farming (IFL) segments. However, full year FY20 net profit grew by 10.4% YoY to RM239.3m, largely due to the continuous growth from MPM and ILF segments. The results were within both our and street’s estimates, accounting for 96% of full-year estimates. We make no changes to our earnings estimates as we expect MPM segment to continue to drive earnings growth on the back stronger export sales boosted by weaker RM. Based on our latest store count, QL has opened c.192 Family Mart stores to date and is on track to meet its FY22 target of 300 stores. Our Neutral call is maintained, with an unchanged DCF-derived TP of RM8.85. On a side note, the group proposed a final dividend of 4.5sen.

  • 4QFY20 revenue grew by 8.4% YoY due to higher contribution from MPM and ILF segment. MPM segment sales increased on the back of higher contribution from surimi, fishmeal and surimi-based products. Meanwhile, the stronger sales in the ILF segment was mainly attributable to higher feed raw material trade, stronger eggs demand, partly fueled by the announcement of Movement Control Order previously as well as higher contribution from Family Mart. Although the group managed to lock-in forward contracts at a favourable CPO price previously, POA segment revenue contracted by 12% YoY due to lower FFB processed.
  • 4QFY20 PBT increased by 2.6% YoY. MPM segment PBT jumped by 31.3% YoY to RM41.5m mainly attributable to the weaker RM which boosted QL’s export margin. On the flip side, POA segment PBT fell by 68.5% dragged by lower FFB processed and forex translation loss.
  • Proposed bonus issue. In conjunction with QL’s 20 years of listing, the group proposed a bonus issue on the basis of 1 bonus share for every 2 QL shares held. The proposed bonus issue is expected to be completed by 4QCY20. Upon completion of the exercise, QL’s share capital will remain at RM620m with an enlarged share base of 2.43bn. Should the proposed bonus issue goes through, our TP will be adjusted to RM5.90.
  • Moving forward. We believe that QL will remain resilient despite the negative economic impact of the pandemic as consumers will continue to spend on nondiscretionary products. As lockdown measures are being eased globally, we believe that it should augur well for QL’s exports. Meanwhile, we gather that Family Mart footfall has increased gradually since the Recovery Movement Control Order.

Source: PublicInvest Research - 30 Jun 2020

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