Overview. KFB’s 3QFY21 bottom-line jumped 19% qoq and 49% yoy to RM7.8m inline with higher sales registered. Malaysia’s sales was at RM34.3m (+18% qoq, +61% yoy) aided by deliveries and order fulfilment being back to normal. In contrast, its export sales dropped 25% yoy and were still affected by the shipments deferment during the period.

Key highlights. The EBITDA margin improved 2.9ppt yoy to 21.3% on solar usage which led to a better cost management. Apart from that, KFB also enjoyed lower effective rate as opposed to the statutory tax rate due to utilisation of tax incentive and reinvestment allowance.

Against estimates: below. Overall 9MFY21 core profit of RM22.3m made up our/consensus forecast at 63%/64% respectively. We think the sluggish results versus our assumptions were mainly due to the shortage of containers and deferment of shipment in export sales coupled with temporary 2 weeks suspension of operations arising from Covid-19 infections in May/June.

Outlook. With an additional 122 manpower acquired in stages from early September to mid-October, the plant is expected to run at 1,700-1,800 m/t output. This 20-30% output increase would help sales to grow further and reap post-pandemic demand.

Forecast. We keep our forecast unchanged at this juncture, pending update from results briefing.

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

Source: BIMB Securities Research - 18 Nov 2021