Able Global Berhad (AGB) 3QFY21 net profit declined by 44.2% YoY to RM8.7m. The weaker set of results was mainly due to the reduction in production from the F&B segment following the implementation of Covid-19 related restrictions. After adjusting for foreign exchange gains, AGB‟s cumulative 9MFY21 core net profit came in at RM29m. Results were below expectations, accounting for 63% and 64% of our and consensus expectations respectively. We are adjusting our earnings forecast for FY21- 23F downwards by 7-13%, mainly to account for the elevated freight and raw material prices as well as a higher effective tax rate following the withdrawal of tax exemption on foreign-sourced income. We continue to favour AGB as we are expecting stronger earnings growth going forward, driven by the expected contribution from its Mexico operations and the group‟s ability to ramp up on its production as the group has fully resumed its operations in Sept. We maintain our Outperform call with a lower SOP TP of RM2.10 (previously RM2.25)
- 3QFY21 revenue fell by 16.2% YoY to RM117.8m, dragged by the lower manufacturing output from its F&B segment (-25% YoY). In addition to the Full Movement Control Order (FMCO) which has restricted AGB‟s workforce to 60%, AGB‟s factories were closed for almost 3 weeks in July following the implementation of Enhanced Movement Control Order (EMCO). On the other hand, the increase in sales volume from the Tin manufacturing segment (+15.3% YoY) has helped to partially offset the decline from the F&B segment.
- 3QFY21 pre-tax profit decreased by 43.1% YoY to RM12.3m, in tandem with a lower profit margins from its F&B segment given the lack of economies of scale (3QFY21: 6.7% vs 3QFY20: 13.2%).
- Dividend. AGB declared a third tier interim dividend of 1sen, bringing the total YTD dividend declared to 3.5sen.
- Outlook. We are anticipating a rebound in earnings growth going forward, mainly premised on the healthy demand for dairy products and the group‟s ability to ramp up its production as the group has resumed to 100% workforce capacity in Sept. We gather that since the Mexican plant commenced operations in July, the group has been ramping up its production as orders remains encouraging. Meanwhile, AGB plans to mitigate the impact of the spike in raw material prices (steel, sugar and milk) by gradually adjusting its selling prices.
Source: PublicInvest Research - 30 Nov 2021