Able Global Berhad (AGB)’s 1QFY23 net profit jumped by 72.4% to RM7.1m,  mainly driven by the recovery in sales for the F&B segment. After adjusting for non-core items, AGB’s core net profit came in at RM7.8m, and was below ours but broadly in-line with consensus estimates, accounting for 18% and  20% of our forecast respectively. The discrepancy in our numbers was mainly due to the lower-than-expected profit margin. Therefore, we adjust our forecast for FY23-25F downwards by an average of 9%, as we raise our profit margin assumption on elevated raw material cost. We are still positive on AGB, as demand for dairy products should remain robust amid weaker  consumer sentiment and higher contribution from its Mexico JV. We reiterate our Outperform call on AGB with a higher SOP based TP of RM1.60 (previously RM1.55) as we roll-forward our valuation base year to FY24. On  a side note, AGB declared an interim dividend of 1 sen.

• 1QFY23 revenue increased by 11.7% YoY to RM146.1m. The stronger set of results was mainly driven by the pick up in sales from the  F&B segment (+22.2% YoY) after the price adjustment on lower raw  material prices. Tin segment revenue decreased by 18% YoY due to  lower sales demand.

• 1QFY23 core net profit surged by 77.1% YoY to RM7.8m. F&B  segment returned to the black given the greater production efficiency,  in tandem with the increase in sales volume. Furthermore, the group  also benefitted from the positive contribution from Mexico JV. We  understand that the Mexico JV is operating at a utilization rate of c.20%.

• Outlook. While the group is still in the midst of obtaining export  approvals for other products, AGB had already gotten the export permit for filled milk, and is currently looking to start its exports to USA in  3QCY23. As such, we are expecting greater contributions from its  Mexico operations, given the ramp up in productions once the group obtained all necessary approvals. With that, the group should be able to free up c.20% of its production capacity in Malaysia (AGB currently exports to the Americas region from Malaysia), which will enable the group to divert its focus to the neighbouring countries.

Source: PublicInvest Research - 29 May 2023