Results

• CCK Consolidated Holdings Berhad’s (CCK) 4Q22 net  profit declined 50.8% qoq but increased by 81.0% yoy  to RM13.0m. On the other hand, quarterly revenue  stood at RM234.9m after sliding 0.3% qoq but rose  25.2% yoy. 

• Beyond estimates. FY2022 net profit of RM62.1m (+150.6%  yoy) has surpassed our/street full year forecasts by  8.6%/19.0%. Similarly, CCK’s full year revenue of RM878.0m  is beyond our forecast but lower than the street estimates.

• Ended FY2022 with solid performance. CCK’s cumulative  net profit of RM62.1m has increased by 150.6% yoy as  compared to RM24.8m in FY2021 due to increase in revenue  to RM878.0m. This is due to the recovery in consumer demand  resulted from the upliftment of movement control order in  Sarawak.

• The retail segment alone achieved RM692.0m (79% of  total revenue) in FY2022 after increasing 19% yoy. This  segment is the largest revenue contributor to the Group as  there are more matured contributions from 3 CCKLocal  supermarket, 4 CCK Fresh Mart retail stores. These resulted  from a strong demand for CCK’s in-house manufactured  processed products in Indonesia. However, the retail segment  delivered a lower revenue quarter-on-quarter which was due  to lower production and sales volume.

• Robust turnover year-on-year by the food service  segment. Among all its business segments, the food service  segment’s FY2022 revenue grew the most at 280% yoy to  RM22.5m as compared to RM5.9m in FY2021. This segment  benefited from the re-opening of schools in Sarawak in April  2022. In 4Q22, the food segment posted a revenue of RM6.0m  (-15.7% qoq) resulted from lower activity of government  schools in Sarawak due to year-end school break. 

• The prawn segment remained solid after growing 183%  yoy to RM58.1 in FY2022 which was mainly due to contribution  from its subsidiary PT Bonanza that was acquired in the  previous quarter (3QFY2022).

• No dividend declared in FY2022.

Comments

• Optimistic for times ahead. The management is very  optimistic in preparing to face the year of 2023 (FY2023) by  taking proactive measures to mitigate the risk in challenging  landscape, whilst optimising the efficiency and productivity of  their business segments. Moving forward, we expect a positive  and strong sales from the Group especially in retail segments  which remains as the main revenue contributor to the Group.

Earnings Outlook / Revision

• We introduce FY24F net profit estimates at RM76.3m  coupled with the uplifting of FY23F net profit to RM67.0m (from RM60.4m, +10%) as we expect better  earnings from the retail (new stores) and prawn  segment (strong contribution from PT Bonanza).

Valuation and Recommendation

• Maintain BUY with a higher target price of RM0.83 (from RM0.78 previously) following our earnings  upgrade. 

• Our valuation is now pegged at PE multiple of 10x FY24F EPS  of 12 sen which is higher than its mean PE of 9x. 

• Our target price represents 10.38% upside from the  current share price of RM0.755.

• We believe that the ascribed PE multiple is justified by  the overall improved outlook for the industry due to  recovery in consumer behaviour.   

Source: JF Apex Securities Research - 23 Feb 2023