• Overview. On yearly basis, Kawan Food’s top and bottom-line rose by 11% and 71% to RM67.4m and RM10.1m supported by improved demand in local market during NRP implementation. During the quarter, KFB managed to expand its customer base particularly in mini market supply chain as well as export sales in US & Asia market. Following on that, Malaysia sales has now grown to 48% share (+4.6 ppts) versus prior year.

• Key Highlights: For FY21, overall export sales destination fell from 1- 22% due to unstable freight schedules and also high freight cost despite having a strong order in the pipeline. Apart from that, labour supply continues to be an issue. Nevertheless, the company currently has 130 contract workers to complement 230 pax stable workers.

• Against estimates: Inline. FY21’s earnings were below, making up 91% of our estimates, however in line with consensus at 96%. PAT increased substantially to RM32.3m (+16.8% Ytd) owing to the higher sales during festive season ie. Christmas aided by lower sales promotion expenses.

• Outlook. With its strong selling and distribution network of over 37 countries across 5 regions, Kawan Food is another local player that is able to reap theplant-based food trend’s full potential – locally & internationally – mainly due to its 50% sales exposure in overseas market. According to management, the company is expected to release its plant-based SKUs in 2QFY22.

• Our call. We are maintaining BUY call with new TP of RM2.36 (previously RM2.78), pegged at 20x PER on FY22 EPS of 11.8 sen. We like KFB for its healthy fundamental, being a net cash company and its market leader position in frozen food arena.

Source: BIMB Securities Research - 1 Mar 2022