An update on Able Global Berhad’s (“Ableglob”) (formerly known as Johore Tin Berhad)’s latest quarter (3Q2021) results for the period 1 July to 30 September 2021. Our first article on Ableglob was published on 7 December 2020.

KEY SUMMARY

1. The Group’s core segment i.e. the F&B segment was impacted in 9M2021 due to reduced sales and increase in the cost of production. The market’s resistance to a full selling price increase caused the dilution of the segment’s margin.

2. In the latest quarter announcement, Management indicated plans to pass down the increase in cost of production to its end customers. We view this as potential good news to the Group if they manage to pass down the costs.

3. In our view, key risks to the Group remain with the uncertainty of the new Covid-19 variant and the loss-making operations of the Mexico JV. We expect FY2022 to be another rough year for the Group given the two key risks mentioned above.

UPDATE ON LATEST QUARTER (JUL – SEP) RESULTS

Compared to the preceding quarter, Ableglob’s revenue and gross profit (and margin) were consistent with a stable contribution from both its tin manufacturing (“Tin”) and food & beverage (“F&B”) segments.

However, net profit fell by RM2.6m / 23% during the quarter due to RM1.6mil loss of equity in its Mexico joint venture. The additional RM1mil loss was caused by a reduction in production output following the Government enforced Enhanced Movement Control Order (“EMCO”) in July which led to several weeks of factory shut down.

During the quarter, the Tin segment was resilient with slight growth in terms of Revenue and PBT, however, was insufficient to compensate for the drop in F&B segment results.

UPDATE ON 9M2021 (JAN – SEP) RESULTS

For 9M2021, revenue from the Tin segment increased by RM11.5m to RM93.7m contributed from the effect of selling prices adjustment on tin cans. Profit before tax (“PBT”) increased by RM7.2m to RM18.10m. The previous year’s result was lower due to lower demand across all industries caused by the initial outbreak of Covid-19.

For the F&B segment, revenue decreased by RM23.3m to RM258.5m mainly caused by a reduction in production output during the several periods of MCOs. PBT decreased by RM9.7m to RM23.0m partly due to the increasing cost of production. The market’s resistance to a full selling price increase resulted in dilution of the F&B segment’s margin.

In the latest quarter report, the management has mentioned that:

“…we are constantly highlighting to buyers about the increase in commodity prices and the market is beginning to accept the inevitable passing down of the costs as other manufacturers are also pushing the cost increases to buyers…”

A piece of potentially good news is if the Group manages to pass down costs to its buyers.

CORPORATE UPDATES

1. In July 2021, it was announced that the joint-venture company, Able Dairies Mexico (“ADMX”) has commenced commercial production. The initial sales were to customers in Mexico only. The factory is expected ramp up its production volume gradually and explore exporting to regions surrounding Mexico.
2. On 4 August 2021, Johore Tin Berhad (Ticker: Johotin) was renamed as Able Global Berhad (Ticker: Ableglob). The proposed change of name is seen positive as it better reflects the Group’s profile as a dairy product manufacturer.
3. On 25 August 2021, it was announced that ADMX has been certified under Safe Quality Food (“SQF”), a standard required to sell to big supermarket chains like Walmart.
4. On 28 September 2021, it was approved at the Group’s EGM for a proposed land acquisition and diversification of business activity into property development.
   • In early September 2021, the Management announced its plan to acquire 120.3 hectares (297.5 acres) of freehold land located in Banting, Selangor (“the Land”) from PNB Development Sdn Berhad for a total consideration of RM169.8m. Funding for the acquisition will be 30% from internal source and remaining from bank borrowings.
   • Out of the 297.5 acres, the Management intends to subdivide and utilise approximately 89.2 acres for expansion of existing manufacturing facility and the remaining for property development.
   • The Management did not provide any further details about its expansion and/or property development plans. Further details to be disclosed at a later stage when the acquisition is complete.

VALUATION UPDATES

With reference to Ableglob’s latest results, we have revised our projection of the Group’s FY2022 full-year results accordingly.

In our view, key risks to the Group remain with the uncertainty of the new Covid-19 variant and the loss-making operations of the Mexico JV. We expect FY2022 to be another rough year for the Group given the two key risks mentioned above.