Despite recording a revenue growth of 24% YoY to RM142.2m, Three-A Resources (3A) net profit for 4QFY21 fell marginally by 2% YoY to RM8.6m. The weaker set of results was mainly due to the higher income tax expense. Full-year FY21 net profit came at RM46.5m, broadly in-line with expectations, accounting for 95% of our full-year forecast. In light of the limited access to management to attest for accuracy of our earnings estimates, we are ceasing our coverage on 3A. Our last call is Outperform, with the target price of RM1.60 based on a 15x FY22F EPS.

• 4QFY21 revenue grew by 24% YoY to RM142.2m, on the back of higher average selling price and higher quantities of products sold. The stronger sales were mainly driven by the increase in Malaysia sales, which jumped by 46.1% YoY to RM89m. On the other hand, export sales slipped by 1% YoY to RM53.2m.

• 4QFY21 net profit declined marginally by 2% YoY to RM8.6m, mainly due to the higher effective tax rate as certain expenses were not allowable for tax deduction. On a QoQ basis, 3A’s PBT fell by 25.6%, mainly due to the higher main raw material cost.

• Future prospects. In order to mitigate the impact of higher raw material prices, 3A remains committed on its automation plans to improve production plant efficiency and to reduce reliance on foreign labour. In addition, the group will continue to focus on R&D initiatives to broaden its product range to meet the constantly evolving customers’ requirements.

Source: PublicInvest Research - 25 Feb 2022