Able Global Berhad (AGB)’s 3QFY23 net profit jumped 94.9% YoY to RM16.2m, as both Tin and F&B segments posted stronger sales. After adjusting for non-core items, AGB’s core net profit came in at RM16.5m, bringing the YTD 9M core net profit to RM32.6m. The results were above our and consensus estimates, at 86% and 94% of full-year forecasts respectively. The discrepancy in our forecast was mainly due to the stronger-than-expected sales from the F&B segment. Therefore, we raise our forecast for FY23-25F by 7-19%, to factor in the robust demand for dairy products. We are still optimistic on AGB’s future outlook, underpinned by healthy demand for dairy products and better contribution from its Mexico JV. Following our earnings adjustment, our SOTP-based TP is revised to RM1.78. Maintain our Outperform call on AGB.

• 3QFY23 revenue increased by 27% YoY to RM176.8m, largely driven by the stronger contribution from its F&B segment (+26.4% YoY). We believe that the greater performance was likely due to stocking up activities from AGB’s customers in anticipation of year end festive season. Meanwhile, the Tin segment revenue grew by 29.6% YoY, due to higher sales demand.

• 3QFY23 core net profit rose by 68.3% YoY to RM16.5m. We attribute the better results to an increase in production efficiency, given the stronger sales which led to a 0.7 ppt expansion in AGB GP margin. Although the group recorded a share of associate loss of RM0.8m, we understand that the Mexican plant is operating above breakeven levels (c.25-30%) but was dragged by unrealized exchange losses from USD loans. Recall that the breakeven levels for the Mexican plant is at c.20- 25%.

• Dividend. AGB declared an interim dividend of 2.0sen, bringing the YTD dividend declared to 4.5sen, translating to a dividend yield of 3.5%.

• Outlook. We foresee AGB to post stronger earnings going forward, mainly premised on the stronger contribution from its Mexico JV and the robust demand for dairy products. The group is still in the midst of obtaining export approvals for full cream milk which has a bigger market in the US as compared to filled milk. While sugar prices have increased by c.40% YTD due to shortage in global supply, we believe that the impact will be offset by the decrease in milk powder (c.15% YTD) and CPO prices (c.10% YTD). Note that sugar, milk powder and palm oil generally account for 30%, 25-35% and 10% of F&B segment’s operating cost respectively.

Source: PublicInvest Research - 30 Nov 2023