• Maintain BUY (TP: RM1.02). Lee Swee Kiat Group (LSKG) 9MFY23 net profit of RM9.5mn (+3.6% YoY) was in line with ours and consensus expectation. No dividend declared. LSKG’s 3QFY23 revenue and earnings both surged by 3.1% YoY and 42.6% YoY on the back of rebound in sales from its export division that increased by 27% YoY. We believe export sales to improve gradually, leveraging on trade diversion to Asian ex-China regions amidst US-China geopolitical tension. On prospect, earnings are expected to remain robust supported by post covid economic recovery, extension of period in instalment payments, normalisation in latex rubber, and strengthen in Ringgit. Maintain BUY call on LSKG with an unchanged TP of RM1.02 based on PER of 11.3x pegged to EPS of 9 sen.

• Key highlights. According to LSKG, the average latex price in 3Q23 was lower by 3.12% compared to 2Q23. Meanwhile, in terms of impairment, 3Q23 recorded an expected credit loss of approximately RM0.407mn on trade receivable related to the Cuckoo Napure rental sales.

• Earnings Revision. No change to our forecast.

• Outlook. We anticipate earnings to remain robust, driven by several factors: i) the full economic reopening post-pandemic, stimulating both domestic and export markets, ii) enhanced purchasing options through online platforms and retail outlets, along with an extended rental scheme (revised to 5 years of instalment payments from the previous 3 years), iii) a decline in latex prices (the raw material for latex bedding) alleviating cost pressures, and iv) a strengthening Ringgit against the USD, favourably impacting its export market division

Source: BIMB Securities Research - 28 Nov 2023