Able Global Berhad’s (AGB) 1QFY24 core net profit grew by 100% YoY to RM15.5m, primarily owing to better contributions from Tin Manufacturing and F&B segments. Although 1QFY24 core net profit accounts for 28% and 29% of our and consensus expectations, we deem the results to be above estimates, as 1Q has always been the weaker quarter, accounting for c.18% of the full-year core net profit for the past 5 years. As such, we raise our earnings forecast for FY24-26F by 6-9% as we lower our input cost assumptions. We continue to favour AGB, as we foresee its earnings growth to be supported bysolid demand for dairy products, stable margins on lower raw material costs as well as better contribution from its Mexico operations. We reiterate our Outperform call, with a higher SOTP-based TP of RM2.30, as we roll forward our valuation base year to FY25F EPS. On a side note, AGB declared a first interim dividend of 2sen.

• 1QFY24 revenue grew by 17.2% YoY to RM171.2m, driven by stronger performance from its Tin Manufacturing and F&B segments.The Tin Manufacturing segment saw its revenue increased by 10.8%YoY owing to higher sales, despite the challenging business environment. As for its F&B segment, revenue improved by 18.7% YoYto RM140.4m, reflecting improved demand for dairy products.

• 1QFY24 core net profit surged by 99.5% YoY to RM15.5m. Weattribute the significant improvement in net profit to an increase inproduction efficiency, given the elevated production output, furthersupported by the lower raw material cost. As a result, AGB’s F&Bsegment saw its PBT margin expanded by 7.2 ppts to 11.9%. AGB’sMexico operations slipped into a loss of RM1.9m, as orders slowedfollowing a spike in orders in 4QFY23. Nevertheless, we gather thatAGB’s customers have already resumed orders, and its Mexicooperations utilization rate is back at 25-30%.

• Outlook. We remain upbeat on AGB’s future prospects, underpinnedby the robust demand for dairy products and the strong growth potentialfrom its Mexico operations.This is mainly due to the strategic locationof Mexico, which has a close proximity to the huge dairy marketespecially the US. We gather that AGB is looking to ramp up itsutilization by penetrating new export markets (eg: Haiti, Puerto Rico).Meanwhile we are expecting an improvement in profit margins goingforward, on better economies of scale and the easing of input cost,sugar and milk which accounts for 25-35% and 30% of AGB’s F&Bsegment’s operating cost.

Source: PublicInvest Research - 29 May 2024