- We maintain BUY on Teo Seng Capital (TSC) with an unchanged fair value of RM2.70/share. This is based on an unchanged fully-diluted PE of 13x FY15F EPS.

- From our recent discussions with management, we learnt that egg prices have gradually rebounded from 28 sen/egg in 2QFY15 to 34 sen/egg over 3QFY15. Note that the latter was the average egg price in 4QFY14 and 1QFY15 and is the highest historically.

- The upward trend in egg prices is positive for TSC. Although we had earlier anticipated prices to tick up in tandem with increased domestic demand during the festive periods (eg. Hari Raya), we did not expect the quantum to be as large. The supply backlog has also eased, thanks to higher exports to Hong Kong.

- Egg prices had declined by 24% QoQ back in 2QFY15 due to seasonally low demand (i.e. absence of festivities and the fasting month in June/July) and to a smaller extent, the impact of GST on overall consumer sentiment.

- Interestingly, we also understand that the price of its egg exports to Singapore (~30% of total production) is presently as high as 38 sen/egg. This is unusual given that the price differential between the domestic and Singapore market is typically between 1-2 sen/egg. The wider spread is mainly attributable to the current weakness of the RM vis-à-vis the SGD (YTD: -31%).

- We make no changes to our FY15F-FY17F earnings estimates unchanged for now. The rebound in egg prices alongside the timely addition of two new farms in July and November (+25% capacity from 3.1mil eggs per day) bode well for TSC’s 2HFY15 earnings.

- Post its recent order-driven sell-down, TSC’s share price has been on an upward trend, rising 31% in the past month. The stock is currently trading at an attractive fully-diluted forward PE of only 7x. This is a steep 53% discount to the average PE of 15x for the consumer companies under our coverage.

Source: AmeSecurities Research - 30 Sep 2015