Able Global Berhad (AGB)’s 2QFY23 net profit fell 16.6% YoY to RM10.5m, dragged by the weaker performance of the Tin segment due to an increase in cost of production. After adjusting for non-core items, AGB’s core net profit came in at RM8.4m, bringing the cumulative 1HFY23 core net profit to RM16.1m. The result was below ours and consensus estimates, accounting for 43% and 42% of our full-year forecasts respectively. The discrepancy in our estimates was mainly due to the lower-than-expected profit margin from the Tin segment. However, we are keeping our forecast unchanged, as we foresee a stronger earnings contribution from the F&B segment in 2HFY23, which should help to cushion the impact of lower profit from the Tin segment. This is mainly premised on higher contribution from its Mexico JV and greater demand for its UHT products. Therefore, we maintain our Outperform call on AGB with an unchanged SOP based TP of RM1.60.

• 2QFY23 revenue grew marginally by 2.7% YoY to RM156.3m. F&B segment sales increased by 5.8% YoY to RM131m, due to a stronger sales volume. The decline in sales from the Tin segment (-10.8% YOY) was mitigated by the better performance from the F&B segment.

• 2QFY23 core net profit fell 39.4% YoY to RM8.4m. Despite the increase in revenue, AGB’s saw its PBT margin declined by 1.6 ppts, dragged by an increase in cost of production for the Tin segment as well as the lower contribution from its Mexico JV.

• Dividend. AGB declared an interim dividend of 1.5sen, bringing the YTD dividend declared to 2.5sen, translating to a dividend yield of 1.8%.

• Outlook. We remain optimistic on AGB’s future outlook on stronger contribution from its Mexico JV as the group had recently managed to obtain the export approval permit for filled milk. We understand that the JV made its maiden export to the US in July and is looking to expand its export presence as the group is in the midst of obtaining export approvals for full cream milk. Additionally, AGB had also been awarded a 12 months contract by the Malaysian Government under the School Milk Program (PSS) to supply UHT milk to eligible children. Therefore, we are expecting AGB to post stronger earnings in 2HFY23.

Source: PublicInvest Research - 28 Aug 2023