Able Global Berhad (AGB) 2QFY21 net profit grew by 2.4% YoY to RM11.4m, contributed by the normalisation in profit margins in the tin manufacturing segment given the adjustment in selling prices. After adjusting for foreign exchange gains, AGB’s 1HFY21 core net profit came in at RM20.8m. Results were largely within expectations, accounting for 45% and 47% of our and consensus estimates. We continue to like Able’s long-term outlook, mainly driven by the expected contribution from its Mexico operations, thereby enabling the group to tap into the growth potential of the North American market. Our Outperform call is reaffirmed with an unchanged SOP TP of RM2.25. On a side note, AGB declared a second tier interim dividend of 1.5sen, bringing the total YTD dividend declared to 2.5sen.

• 2QFY21 revenue grew by 4.7% YoY to RM120.5m, as both Tin and F&B segment posted stronger sales. The better performance from the tin manufacturing segment (+3.4% YoY) was mainly driven by the increase in sales volume. As for the F&B segment, revenue grew by 5.1% YoY to RM88.3m due to adjustment in selling prices, following the spike in global freight cost.

• 2QFY21 pre-tax profit improved marginally by 1.2% YoY to RM14.8m, mainly attributable to the adjustment in selling prices for the tin manufacturing segment, leading to an expansion in PBT margins (2QFY21: 20.4% vs 2QFY20: 16.5%). However, the F&B segment saw its PBT falling by 21.2%, mainly due to the market’s resistance to the full selling price adjustment and higher freight cost.
  
  Outlook. Although milk prices has fallen by c.18% since reaching its peak in 1QCY21, as steel prices and shipping costs remain elevated, AGB plans to mitigate the impact of the spike in raw materials by adjusting its selling price accordingly. After a slight delay due to Covid19 related travel restrictions, Able Dairies Mexico S.A.P.I.DE C.V. (ADMX) has finally commenced commercial production operations in July 2021. Prospects for the Mexican operations remains exciting, given its geographical advantage being in the Americas region, providing cost advantage in terms of logistics arrangements than exporting from Malaysia. Furthermore, ADMX has been certified Safe Quality Food (SQF), which is a standard required to sell to Walmart and big supermarket chains, creating a new revenue stream for the group.

Source: PublicInvest Research - 26 Aug 2021