• Under Budget 2024, the Malaysia government will lift price controls for poultry and eggs.

• We view this development positively as poultry producers would have a free hand in adjusting selling prices according to their cost of production.

• Currently, the ceiling price on standard chicken is RM9.40/kg. The subsidy is about 80 sen per kg.

• The ceiling price is imposed only on whole birds and not on other products such as deboned chicken.

• M Flour is expected to be only a small beneficiary of the removal of the ceiling price. This is due to the group’s small exposure to the live bird’s segment. Hence, we are keeping our earnings forecast for M Flour for now.

• Live birds accounted for an estimated 15% of M Flour’s poultry sales volume in 1HFY23. Cut-ups and deboned poultry products made up a larger 43% of sales volume in 1HFY23.

• M Flour’s share of earnings in the poultry division was RM19.9mil in 1HFY23 while the flour division generated an EBIT of RM25.6mil.

• We maintain HOLD on M Flour with a fair value of RM0.70/share, based on a fully diluted FY24F PE of 10x, which is the 2-year average. We ascribe a 3-star ESG rating to M Flour.

Source: AmInvest Research - 16 Oct 2023