Company Background. CCK Consolidated (CCK) focuses primarily on retail and poultry farming in East Malaysia and Indonesia. It operates through 4 business segments: (i) retail, (ii) poultry, (iii) prawn, and (iv) food service. The core business is the retail segment, which includes retail stores, supermarkets and wholesale outlets. The group's extensive retail network is supported by a fully integrated supply chain, encompassing a feed mill, layer farming, poultry farming & processing, prawn farming & processing, and the manufacturing of house-brand food products.

Prospects. (i) CCK is strategically expanding its retail network with a strong focus on optimising economies of scale and enhancing the efficiency of the company’s fully integrated supply chain. Currently, the group’s retail network consists of 75 locations, including 66 CCK Fresh Mart stores, 3 CCK local supermarkets and 6 CCK wholesale stores, (ii) Indonesia's expanding market for in-house sausages & nuggets is driving growth with the Pontianak facility boosting production since FY21. The group is now exploring further investments to expand capacity, and (iii) FY22 acquisition of PT Bonanza significantly boosted the profitability of the prawn segment, driven by strong export growth, economies of scale and robust domestic sales through its own retail channels.

Financial Performance. In 1QFY24, CCK posted higher revenue of RM260.7mil (+8.4% YoY) with a PAT of RM21.4mil (+32.2% YoY). This was mainly driven by increased sales volumes from both the retail & wholesale channels, better product mix, effective cost control measures and strong demand for in-house manufactured processed products.

Valuation. CCK is trading at an attractive FY25F P/E of 12.8x, which is lower than Bursa Consumer Index’s 5-year forward average of 17.5x. As a comparison, QL Resources, involved in marine product manufacturing, integrated livestock farming and convenience store chain, trades at a much higher FY25F P/E of 35x.

Technical Analysis. We expect further upside for CCK given that it took out the 2-month downtrend line a few sessions ago. In view that the 20-day and 50-day EMAs are starting to turn upwards, additional strength may be present in the coming sessions. A bullish bias may emerge above the RM1.60 level with stop-loss set at RM1.48, below the 50-day EMA. Towards the upside, near-term resistance level is seen at RM1.90, followed by RM2.00.

Source: AmInvest Research - 19 Aug 2024