• Kawan Food’s 9M16 net earnings of RM25.8m were inline with our full year forecast making up 77%.

• Net profit increased slightly to 2.8% YTD in tandem with overall sales improvement in most regions.

• Higher qoq earnings of RM12.2m (+33.5%) were mainly due to lower advertisement and promotion expenses.

• Maintain our FY16 and FY17 earnings forecast at RM33.5m and RM46.7m respectively with new target price of RM4.33 based on 25x PE. Maintain Buy.

Better 9M16 performance. Kawan Food’s 9MFY16 revenue increased by 15.6% to RM144.3m due to higher sales registered from all regions except Europe. Among the regions that generate greater sales are Malaysia at RM52.7m (+13.3%) and North America at RM49m (+22.9%) YTD. In line with this, earnings increased slightly by 2.8% to RM25.8m despite a foreign currency loss of RM0.9m in 9M16 compared to foreign currency gain of RM6.5m for the past year corresponding period.

Earnings for 3Q16 higher than previous quarter. Kawan Food 3Q16 earnings improved 33.5% to RM12.2m despite a revenue drop of 14.8% to RM47.3m. Earnings increased qoq mainly due to lower advertisement and promotion expenses as well as favourable RM/USD exchange rate.

Source: BIMB Securities Research - 28 Nov 2016