Company Background. CCK Consolidated (CCK) is engaged in 4 core business segments: (i) retail, (ii) poultry, (iii) prawn, and (iv) food service. The group operates supermarkets/wholesale/retail stores, boasting a network of 72 touch points across East Malaysia. CCK’s retail network is supported by a fully integrated supply chain, including a feed mill, layer farming, poultry farming & processing, prawn farming & processing, and the manufacturing of house-brand food products. Retail stores operate under the CCK Fresh Mart brand, while supermarkets carry the CCKLocal brand.

Prospects. (i) Plan to strategically expand its retail network by opening more supermarkets and retail stores in East Malaysia, focusing on improving economies of scale and optimising the group’s fully integrated supply chain for enhanced efficiency, (ii) The synergistic acquisition of PT Bonanza in FY22, which is engaged in shrimp processing for local & export markets, has enhanced the group’s export-oriented prawn products, adding size/scale to the segment, and (iii) Robust demand persists for its in-house manufactured brands of sausages and nuggets while the commencement of operations at its new facility in Indonesia has further bolstered production capacity.

Financial Performance. In 9MFY23, CCK posted a higher revenue of RM739.4mil (+15% YoY) with a PAT of RM52.9mil (+7.7% YoY). This was mainly driven by contributions from its established retail network, higher sales volumes from both retail & wholesale channels coupled with strong demand for manufactured processed products.

Valuation. CCK is trading at an attractive FY24F P/E of 6.7x, which is lower than its 5-year forward average of 9.4x and Bursa Consumer Index’s 18x 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 34.7x.

Technical Analysis. CCK may trend higher after it surged to a new multi-year high and closed above the RM0.85 resistance 2 weeks ago. The stock also broke out from a 5-month bullish rectangle pattern, which coincided with rising EMAs, likely indicating that nearterm upward momentum may persist. A bullish bias may emerge above the RM0.85 level, with stop-loss set at RM0.79, below the 50-day EMA. Towards the upside, near-term resistance level is seen at RM1.00, followed by RM1.10.

Source: AmInvest Research - 19 Jan 2024