Summary

• Significantly above our expectations. 2Q23 core net profit soared 565.9% YoY and 30.4% QoQ, respectively to RM25.4m, bringing the 6MFY23 earnings to RM44.8m. The results came in above expectations, amounting to 91.1% of our full year forecast at RM49.2m. Key deviations were mainly due to the higher-than-expected selling price of chicken eggs as well as softer-than-expected feed costs prices.

• QoQ. A drop in revenue by 3.1% was noticed, no thanks to marginally lower selling price of eggs. However, TEOSENG’s core net profit increased 30.4% QoQ, amid lower feed costs prices coupled with egg subsidy received from the government’s grant.

• YoY. Revenue rose 12.9%, while the core net profit soared 565.9% mainly due to higher average selling price of eggs and sales volume.

• YTD. Similarly, 6MFY23’s results were growing on the back of higher average selling price of eggs and sales quantity, coupled with normalised feed costs prices.

• Outlook. We expect TEOSENG’s performance to remain steady on an upward trend at least for the near term, with the stabilized maize and soybean meal prices. Meanwhile, the reopening of business activities locally since last year and the China reopening of borders since January 2023 will be able to help the overall demand and expect the chicken egg prices to continue its upward tone. Should the price control ceiling being removed there will be upside earnings potential for TEOSENG. We believe the effort of reducing the electricity costs with the commissioning of the PV system as well as the proactive measures to expand its customer base through e-commerce will be earnings accretive.

Valuation & Recommendation

• Although TEOSENG’s outlook has turned brighter amid the improved outlook on chicken eggs prices, we are ceasing coverage on TEOSENG due to reallocation of internal resources. Our last recommendation on TEOSENG was BUY with a fair value of RM1.34, derived by ascribing PER of 8.0x to its FY23f EPS of 16.8 sen.

Source: Mplus Research - 23 Aug 2023