• Overview. QL’s 4Q20 PATAMI of RM43.0m came in flat supported by better sales from MPM and ILF segments as well as Family-Mart business. On quarterly basis, profit declined by 44% resulted from lower sales and margins from MPM and ILF segments, assisted by higher finance costs of RM19.4m (+48% qoq) and higher effective tax rate.
• Against estimates: inline. FYE20 profit was in line with our estimates, increased 10% yoy to RM239m. Higher revenue from MPM and ILF, and improved margin from MPM division lifted profit higher. Group’s PATAMI margin was maintained at 6% yoy with MPM margins expanded to 17% from 16% in FYE19.
• Dividend and bonus issues: Board has proposed a final single tier DPS of 4.50sen for FYE20, and on the separate announcement, proposed a bonus issue on a basis of 1 Bonus share for every 2 existing QL’s share on an entitlement date to be determine later. If approved, the theoretical price of ex-dividend and ex-bonus share (based on our TP of RM9.00) will be RM5.97.
• Outlook. We believe QL would continue to attract high valuation due to: 1) its excellent track record of growing both revenue and profit; 2) consumer-driven business which regarded as recession-proof; 3) its status as one of the largest marine product players in Asia; and 4) its compliance to ESG and Halal standards which will continue to attract global funds. The catalyst for future growth will be driven by 1) stable demand for its marine products; 2) better margins from ILF segments; and 3) expansion of FamilyMart business.
• Our call. No change in earnings forecast. Maintain HOLD with new SOP-derived TP of RM9.00 against RM8.10 previously

Source: BIMB Securities Research - 30 Jun 2020