Company Background. CCK Consolidated’s (CCK) core business comprises of 4 segments: retail, poultry, prawn and food services. Business operations are carried out primarily in Sarawak, Sabah and Indonesia. The group’s retail network has grown to 72 touch points comprising of retail stores/supermarkets and is supported by a fully integrated supply chain consisting of a feed mill, layer farming, poultry farming/processing, prawn farming/processing and the manufacturing of house-brand food products.

Prospects. (i) Focus on expansion of its retail network, improving economies of scale and efficiency of the group’s fully integrated supply chain, (ii) On the Indonesian front, demand for CCK’s in-house manufactured brands of sausages and nuggets continues to be robust, and (iii) The acquisition of PT Bonanza has proven to be synergistic to the group’s existing seafood business and has complemented export-oriented prawn products and added size/scale to this segment.

Financial Performance. In 1QFY23, CCK posted a higher revenue of RM240.6mil (+22% YoY) with a PAT of RM16.2mil (+45% YoY). This was mainly due to a more favourable product mix, contributions from PT Bonanza that boosted the prawn segment, and increased sales volumes in the group’s retail & wholesale channels.

Valuation. CCK is trading at an attractive FY24F P/E of 6.9x, which is lower than its 5-year historical average of 8.6x and Bursa Consumer Index’s 17.5x currently. As a comparison, QL Resources, involved in marine-products manufacturing, integrated livestock farming and convenience store chain, trades at a much higher FY24F P/E of 33.7x.

Technical Analysis. We expect further upside for CCK after posting a long white candle and pushed above the RM0.76 resistance on Friday. In view that the 20-day and 50-day EMAs are starting to turn upwards, a positive outlook can be expected here. A bullish bias may emerge above the RM0.76 level, with stop-loss set at RM0.69, below the 50-day EMA. Towards the upside, near-term resistance level is seen at RM0.85, followed by RM0.90

Source: AmInvest Research - 7 Aug 2023