• Overview. KFB’s 2QFY21 core profit declined by 19% qoq and 25% yoy to RM6.5m on decrease in sales mainly due to shortage of containers and deferment of shipment in export sales and temporary 2 weeks suspension of operations arising from Covid-19 infected cases.

• Key highlights. In contrast, its EBITDA margin rose 3.7ppt qoq and 2.9ppt yoy to 21.3% on the back of better cost management.

• Against estimates: below. 1HFY21 core profit of RM14.5m made up our/consensus forecast at 41%/42% respectively. We saw its PAT compensated by lower income tax due to utilisation of tax incentive and reinvestment allowance and lower finance cost due lower term loans secured.

• Dividend. As expected no dividend was declared for the quarter under review. An interim single tier dividend of 3.0 sen per ordinary share was declared and paid during 1QFY21, translating into dividend yield of 1.6% at current level.

• Outlook. We view the poor results mainly due to plant suspension, however, management indicates approximately 85% of its staff have completed 1st dose, and the 2nd dose expected to be completed by the end of August. With this, we can expect lesser risk and smoother plant operation moving onwards given the vaccination progress.

• Forecast. We keep our forecast unchanged, as we expect its earning to catch up in 2H21 driven by pandemic-related market demand as well as better operational environments. Its variety of frozen food products serve well in the current confined environment, in our view.

• Our call. We like KFB for its healthy fundamental, being a net cash company and its market leader position in frozen food arena. We reiterate BUY call with TP of RM2.78, pegged at 28x PER on FY21 EPS of 10 sen.

Source: BIMB Securities Research - 19 Aug 2021