• Overview. QL’s 4Q21 PBT more than doubled yoy to RM146m mainly due to higher sales volume and improved margin in MPM segment on account of better price achieved and cost efficiency for surimi and surimi-based products, as well as aquaculture business. Improvement in raw material trading and FamilyMart business also aided to the better results. On qoq basis, higher profit (+35% qoq) was due to higher profit contribution from POA segments as well as higher raw material trading margin and improved performance from FamilyMart business - despite higher feed costs and poor egg price for Peninsular and Vietnam market in ILF segment and lower margins in MPM segment.

• Key highlights. Palm Oil Activities (POA) has been renamed to POCE (Palm Oil and Clean Energy) to better reflect Boilermech Holdings as its subsidiaries from associate previously. The more than 100% increase in POCE earnings was mainly due to a one-off gain of RM79m arising from accounting MFRS-3 Business Combination resulting from the acquisition of Boilermech.

• Against estimates: Above. QL’s FY21, profit was above our and consensus’ estimates. Group’s PBT margin increased 10% from 7% in FY20 with MPM and POCE margins expanded to 21%/28% respectively from 17%/2% in FY20.

• Dividend. Board has proposed a final single tier dividend per share of 3.50sen for FY21 (FY20: 4.50sen), translating to DY of 0.6%.

• 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 is regarded as recession-proof; 3) its status as one of the largest marine product players in Asia; and 4) its high 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 and POCE segments; and 3) expansion of FamilyMart business.

• Our call. We maintain our FY22/23 earnings forecast with unchanged SOP derived TP of RM6.23, which implies a FY22F PER of 51.4x. Maintain HOLD as we believe fundamentals have been well reflected.

Source: BIMB Securities Research - 28 May 2021