Results Highlights

• Teo Seng’s 3Q2019 net profit surged 157.2% Y.o.Y to RM18.0 mln, lifted by higher production and sale of chicken eggs, higher average selling prices (ASP) of chicken eggs and improved demand for animal health products. Revenue for the quarter gained 10.5% Y.o.Y to RM138.4 mln.

• For 9M2019, cumulative net profit soared 245.2% Y.o.Y to RM45.2 mln. Revenue for the period added 19.6% Y.o.Y to RM410.1 mln. The reported results already make up to 96.9% of our previous net profit estimate of RM46.6 mln. The reported revenue, however, came in slightly below our expectations, amounting to 73.3% of our fullyear forecast of RM559.8 mln. The variance in the bottom line is mainly due to the stronger-than-expected recovery in average selling prices of chicken eggs.

• Segment wise in 3Q2019, the poultry farming segment’s pretax profit stood soared 217.0% Y.o.Y to RM21.1 mln, boosted by improved chicken egg ASPs and higher sales quantity. The trading segment’s pretax profit grew 27.3% Y.o.Y to RM2.5 mln on improved demand for animal healthcare products.

• As of 3Q2019, Teo Seng’s gearing is reduced to 54.7% (from 58.0% recorded in 2Q2019). Moving forward, we expect Teo Seng’s gearing level to remain above the 50.0% level as the group continues to hinge on external funding for its long-term expansion plans, targeting production of 5.0 mln eggs per day by end-2022. An interim dividend of 2.0 sen was declared.

Source: Mplus Research - 21 Nov 2019