LHI’s 4Q19 core net profit of RM42.1m (QoQ: -14.9%; YoY: +29.1%) took FY19 core net profit to RM171.6m (-12.9%). The results beat our expectation (accounting for 105.6% of our estimate) but came in within market consensus (accounting for 99.2% of consensus estimate). Better-than-expected performance at the feedmill was the key reason to the deviation against our estimate. We maintain our earnings forecasts, TP of RM1.00, and BUY rating for now, pending more update from the upcoming conference call. At RM0.775, LHI is trading at FY20-21 P/E of 13.9x and 11.6x, respectively.

Beats our estimates, but within consensus. 4Q19 core net profit of RM42.1m (QoQ: -14.9%; YoY: +29.1%) took FY19 core net profit to RM171.6m (-12.9%). The results beat our expectation (accounting for 105.6% of our estimate) but came in within market consensus (accounting for 99.2% of consensus estimate). Better-than expected performance at the feedmill was the key reason to the deviation against our estimate.

QoQ. 4Q19 core net profit declined by 14.9% to RM42.1m (from RM49.4m in 3Q19) as higher ASPs of broiler chickens and DOC in Indonesia and broiler chickens in Vietnam were more than negated by lower ASPs of broiler chickens and DOC in Malaysia, and weaker performance in Singapore.

YoY. 4Q19 core net profit rose 29.1% to RM42.1m, as weaker contributions from Malaysia (due to lower ASPS of broiler chickens, DOC and eggs), Singapore (due to lower ASP for processed food) and Indonesia (due to lower ASP for DO C) were more than mitigated by higher earnings contribution from Vietnam (arising from higher ASP and sales volume of broiler chickens and higher feed sales volume).

YTD. Despite a 5.4% increase in revenue, FY19 core net profit declined by 12.9% to RM171.6m (from RM196.9m in FY18), as higher poultry products sales volume in Indonesia and Vietnam and higher feed sales and broiler chicken ASP in Vietnam were more than negated by (i) depressed broiler chickens and DOC prices in Malaysia and Indonesia, (ii) lower egg prices in Vietnam, and lower processed food and fresh chicken prices in Singapore, and (iii) the absence of earnings contribution from Jordon International (which was disposed in end 1H18).

Forecast. Maintain, pending more updates from the upcoming conference call.

Maintain BUY with unchanged TP of RM1.00. We maintain our BUY rating with an unchanged TP of RM1.00 for now (based on 18x revised FY20 core EPS of 5.6 sen), pending more update from management. At RM0.775, LHI is trading at FY20 -21 P/E of 13.9x and 11.6x, respectively.

Source: Hong Leong Investment Bank Research - 19 Feb 2020