Kumpulan Fima’s (KFima) 1QFY16 revenue grew 9.2% YoY to record RM141.3m, accounting for 24% of our forecasts. However, core earnings were softer by 34.7% YoY to RM11.3m, which only met 16% of our estimates. Higher revenue was supported by strong growth of manufacturing and plantations divisions, while bulking and food division reported lower contributions. PBT performance declined compared to 1QFY15, however, as its food division reported a PBT loss, while manufacturing and bulking divisions showed softer PBT for the quarter. We understand that the market will be a bit challenging going forward, but we believe the Group will continue chalking steady growth. We are also positive on its plantations division’s prospects, particularly harvesting of the first plantings at KFima’s Miri estate which is scheduled to begin in 2QFY16. We retain our Neutral call on KFima with an unchanged SOTP-derived target price of RM2.26.

• Manufacturing recorded higher revenue of RM72.5m, a 9.6% jump YoY, primarily attributed to higher sales volume. However, PBT level was lower by 3.7% YoY to RM12.0m, due to unfavourable products mix. The division will likely remain steady in the near to medium term.
• Plantations showed a strong revenue growth of 29.4% YoY to RM37.6m, mainly due to higher sales volume of CPO and CPKO, despite lower average selling price of CPO (RM2,191/mt 1QFY16 vs. RM2,222/mt 1QFY15). At PBT level, plantations division recorded a 3.3% YoY increase.
• Bulking division’s revenue is slightly lower by 0.2% to record RM15.3m, due to lower contributions across its sub-segments. PBT for the division reduced by 5.5% YoY, in line with the decline in sales.
• Food division registered lower revenue of RM14.9m, 17.3% decline, as sales volume decreased across its Papua New Guinea and Malaysia market. At PBT level, the division reported a loss of RM3.3m for the quarter, primarily affected by challenging market environment. Although we do believe in the food division’s growth in its tuna sales in the medium term, we understand that it would take some time as the division continues focusing on its productivity, efficiency and cost control.

Source: PublicInvest Research - 28 Aug 2015