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PublicInvest Research

Author: PublicInvest   |   Latest post: Thu, 21 Jan 2021, 11:57 AM

 

CCK Consolidated - Steady Quarter

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CCK saw its 9MFY20 core earnings increase by 15.5% YoY to RM23.8m on the back of stronger retail earnings despite being affected by the Movement Control Order period this year due to the COVID-19 pandemic. The steady results accounted for 77% and 73% of our and consensus full-year expectations, respectively. The results would have been even better if not for the strengthening of the US dollar against the Malaysian Ringgit by 2.4%, which affected its poultry performance due to an increase in feed cost. No dividend was declared for the quarter. Maintain Outperform call with an unchanged TP of RM0.73.

  • 3QFY20 revenue (QoQ: +7.3%, YoY: -0.4%). For the quarter, CCK saw its sales slip by 0.4% YoY to RM165.1m, dragged by weaker sales contributions from all core segments. We believe a decline in both average broiler (-16% YoY) and egg prices (-15% YoY) weighed on poultry sales, down 11.8% YoY to RM23.1m. Sales from food service, which provides catering services to contractors of government school food programmes, dropped 7.5% YoY to RM4.9m. Prawn-related revenue tumbled 47.1% YoY to RM3.7m as its export markets for prawns, namely, Japan and Australia, were weak amid low global pricing. Meanwhile, contribution from the processed food segment in Indonesia rose 4.9% YoY to RM133.5m, led by the new opening of first supermarket called CCKLocal in Kuching on 31st July 2020 and three new retail stores. Indonesian retail revenue contribution to the Group remained at 16%.
  • 3QFY20 core net profit (QoQ: -12.8%, YoY: +32.3%). 3QFY20 core earnings increased by 32.3% YoY to RM8.2m on the back of stronger earnings contribution from the retail and food segments. Poultry pre-tax earnings dipped 18.2% YoY to RM1.8m, dragged by higher feed costs due to unfavourable Ringgit movements (3QFY20: USDMYR vs 3QFY19: +1%) and weaker selling prices. During the quarter, soybean meal price, rose 1% YoY while corn price, which made up 55% of the imported feed stock, dipped 12% YoY. The prawn segment tumbled 75% YoY to marginal earnings of only RM0.1m due to a slump in global demand. Retail earnings rose 35.5% YoY to RM8.4m, driven by contributions from the new outlets. Meanwhile, earnings contribution from its 27.2%-owned animal feed distributor, Sarawak Gold Coin S/B was down 7.1% YoY to RM1.3m.
  • Another supermarket coming up. The Group’s second supermarket, branded under “CCKLocal” will be opened in Kota Kinabalu, Sabah in the final quarter of 2020. Management has seen promising response from the opening of its first supermarket in Kuching and targets to break-even soon. However, contribution to the Group is relatively small in the next one year. In addition to that, the Group plans to open two retail stores in Song and Simunjan in Sarawak soon, bringing the total CCK Fresh Mart retail stores to 65 for 2020 (2019: 61)

Source: PublicInvest Research - 24 Nov 2020

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CCK 0.575 +0.005 (0.88%) 566,300 

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