Results

• CCK Consolidated Holdings Berhad’s (CCK) 1Q23 net profit increased 24.6% qoq and 45.2% yoy to RM16.2m. Similarly, CCK’s revenue rose by 2.4% qoq and 21.9% yoy to RM240.6m for the first quarter.

• Results within expectation. CCK’s 1Q23 revenue posted at RM240.6m entails 27.0%/26.3% of our/consensus forecast. On the other hand, net profit accounted for 24.2%/26.3% of our/consensus estimates at RM16.2m.

• Better QoQ. The revenue saw a quarter-on-quarter increase of 2.4%, primarily fueled by the retail segment, which experienced a significant 18% qoq growth. This surge was a result of higher sales volume. Profit before tax (PBT) also rose by 15.5% compared to the previous quarter. This increase can be attributed to the strong performance of the retail segment (+18.0% qoq), which offset the decline in the prawn (-35.5%) and poultry (-79.5% qoq) segments.

• Superb YoY. Revenue for 1Q23 hit RM240.6m, marking a significant year-on-year increase of 21.9% compared to RM197.4m in the first quarter of 2022. The strong performance can be attributed to several factors. Firstly, contribution from newly acquired PT Bonanza greatly boosted the prawn segment. Secondly, the retail segment showed a solid performance due to increased consumer demand. Lastly, heightened activities in government schools drove the performance of the food service segment.

• The retail segment continues to be the primary revenue driver for CCK, with revenue RM184.0m in 1Q23. This represents a quarter-on-quarter increase of 4.3% and a year-onyear increase of 11.0%. The retail segment accounted for 76.5% of the total revenue during this period. The higher revenue compared to the previous quarter can be attributed to increased production and sales volume from CCK's Indonesian manufacturing operations. On a year-on-year basis, the growth is attributed to the more mature contributions from the established retail network and strong consumer demand.

• Increase 500.9% yoy revenue from the prawn segment. It is worth noting that the prawn segment recorded the highest percentage increase in revenue compared to other segments. This remarkable growth was due to the contribution from the newly acquired PT Bonanza, which significantly boosted the overall export volume of the segment. Similarly, 1Q23 profit recorded for the prawn segment saw a significant increase of 923.9% to reach RM2.3m, compared to RM0.2m in the same period a year earlier.

• Cash balance increased by 7% to RM60.8m.

• As part of its expansion plans, CCK has opened 1 CCK Fresh Mart in Telipok, Sabah, in 1Q23.

• No dividend declared in 1Q23.

Comments

• Cautiously optimistic. The management of the company is highly optimistic and actively taking measures to address the challenges of the business landscape in the year 2023 (FY2023). They are focused on mitigating risks and optimizing the efficiency and productivity of their business segments. Looking ahead, the Group anticipates positive and robust sales, particularly in the retail segment, which continues to be the main revenue driver. However, one key risk currently observed is the volatility of the US dollar against the Malaysian Ringgit, which has an impact on the fluctuation of corn and soy prices.

Earnings Outlook / Revision

• No change to our bottomline estimates at RM67.0m and RM76.3m for FY23F and FY24F, respectively. This is attributed to the growth trajectory aligning with our projected forecasts, which we have factored in the growth assumption for the new store (retail segment) and contribution from PT Bonanza (prawn segment). On the other hand, the revenue is projected to reach RM892.2m and RM989.1m for FY23F and FY24F, respectively.

Valuation and Recommendation

• Maintained a BUY call for CCK Consolidated Holdings Berhad with the same target price of RM0.83.

• Our valuation is pegged at PE multiple of 10x FY24F EPS of 12 sen, which is at its 3Y mean PE.

• Our target price indicates a potential upside of 13.4% from the current price.

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

Source: JF Apex Securities Research - 30 May 2023