Company Background. CCK Consolidated (CCK) is principally focused on retail and poultry farming in East Malaysia and Indonesia. The group operates under 4 business segments: (i) retail, (ii) poultry, (iii) prawn, and (iv) food service. CCK’s core business is the retail segment, which operates retail stores, supermarkets and wholesale stores. Its wide-reaching retail network is supported by a fully integrated supply chain consisting of a feed mill, layer farming, poultry farming & processing, prawn farming & processing, as well as the manufacturing of house-brand food products.

Prospects. (i) Strategically expand the company’s retail network while maintaining a steadfast focus on economies of scale and the efficiency of its fully integrated supply chain. As of end-FY23, the group's retail network consisted of 75 touchpoints, including 66 CCK Fresh Mart stores, 3 CCKLocal Supermarkets and 6 CCK wholesale stores, (ii) The acquisition of PT Bonanza in FY22 synergises CCK’s seafood business, enhancing its export-oriented prawn products and boosting export volumes to Japan, Taiwan, South Korea and Hong Kong, and (iii) Invested in a new manufacturing plant and logistics centre with a chicken abattoir, cold room and food processing for sausages/nuggets/meatballs, significantly boosting production capacity and supporting higher sales volume.

Financial Performance. In FY23, CCK posted a higher revenue of RM995mil (+13.3% YoY) with a PAT of RM84.7mil (+36.4% YoY). This was mainly driven by higher sales volumes from both the retail & wholesale channels, better contributions from its established retail network, and strong demand for in-house manufactured processed products in Indonesia.

Valuation. CCK is trading at an attractive FY24F P/E of 8.6x, which is lower than Bursa Consumer Index’s 5-year forward average of 17.8x. 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 36x.

Technical Analysis. CCK may rise higher after it surged to a new multi-year high and closed above the RM1.05 resistance 2 sessions ago. As the stock has also broken out from a 6-week bullish rectangle pattern together with rising EMAs, we expect further upside from here. A bullish bias may emerge above the RM1.05 level with stop-loss set at RM0.98, below the 50-day EMA. Towards the upside, near-term resistance level is seen at RM1.30, followed by RM1.40.

Source: AmInvest Research - 26 Apr 2024