Able Global Berhad (AGB)’s 4QFY21 net profit grew by 26.4% YoY to RM10.2m, due to the better performance from the tin can manufacturing segment. After adjusting for non-core items, ABG’s 4QFY21 core net profit came in at RM9.5m. This brings full-year FY21 core net profit to RM38.5m. Results were in-line with our and consensus estimates, accounting for 96% and 97% respectively. We remain optimistic on AGB as we continue to anticipate stronger earnings growth from its Mexico operations, new product launches, as well as normalisation in margins following management’s initiatives to mitigate the rising raw material costs. Our Outperform call and SOP TP of RM2.00 is maintained.

• Results review. 4QFY21 revenue increased by 6.8% YoY to RM147.7m, driven by the stronger sales from both Tin manufacturing (+1.9% YoY) and F&B (+8.3% YoY) segments. AGB’s PBT jumped by 40.7% YoY to RM14.8m, thanks to the higher contributions from the Tin manufacturing segment. This was mainly due to the adjustment in selling prices for tin cans, resulting in an improvement in PBT margin to 17.5% (4QFY20: 3.6%). On the other hand, F&B manufacturing saw its PBT margin declined to 8.1% (4QFY20: 9.1%), owing to an increase in commodity prices (milk and sugar).

• Dividend. AGB declared a fourth interim dividend of 1.5 sen, thus bringing the total dividend declared for FY21 to 5 sen, which translates to a decent dividend yield of 3.4%.

• Outlook. The Mexican factory has commissioned in July 2021 and has obtained the Safe Quality Food (SQF) certification which enables AGB to enter into big supermarket chains like Walmart in the US. Additionally, the group is working on expanding its product portfolio, by adding UHT milk and is also currently looking into plant-based milk alternatives. While demand for dairy products is still healthy, profit margins remain under pressure given the hike in raw material prices and shipping costs. We are expecting an improvement in AGB’s profit margins however, mainly underpinned by the increase in selling price as we understand that it has become easier to AGB’s customers to accept the inevitable adjustment in selling prices. In addition, by achieving greater economies of scale as the group gradually ramps up Mexico’s production should help to support AGB’s margins as well. AGB expects its Mexican plant to breakeven in 2QFY22 (c.20% utilisation).

Source: PublicInvest Research - 28 Feb 2022