OUTPERFORM
Target Price: RM3.68


Period 1Q13

Actual vs. Expectations
The 1Q13 net profit (NP) of RM31.4m was slightly below estimates, making up 19.1% and 18.7% of the street's estimate and our forecast of c. RM168m. However, 1Qs are typically seasonally slower as compared to the other quarters and usually contributes about 19%-21% to the full year earnings.

Dividends  
No dividend was declared in the quarter as expected.

Key Result Highlights

• YoY, 1Q13 revenue was up by 8.8% underpinned by higher sales recorded in the marine products manufacturing ('MPM') (+30% YoY) and integrated livestock farming ('ILF') (+21% YoY) segments, which cushioned the drop in palm oil activities ('POA') (-36% YoY). 
• The strong growth registered in MPM was mainly due to higher contribution from the Surabaya fishery operation and improved fish landing in Sabah. ? The better results seen in ILF were mainly attributable to improved volume of feed raw material traded as well as a higher Indonesia's poultry contribution.
• 1Q13 PBT improved 15.0% YoY while margin was up by 0.4 ppt to 8.4%. This is because of the higher margin recorded by MPM (12.6% in 1Q13 vs. 10.7% in 1Q12), which cushioned the decline in POA (4.6% in 1Q13 vs. 6.9% in 1Q12). (see overleaf).

Outlook  
We continue to like QL Resources for its expansion in the MPM and ILF businesses to achieve better economies of scales. The POA outlook remains positive as we believe its contribution will rise when the FFB production improves seasonally in 2HCY12.

Change to Forecasts

Maintaining our FY13-14E NP forecasts of RM168m-RM196m at this juncture. We may revise our earnings estimates down slightly due to the variance contributed by POA after further clarification with the management.

Rating 
Maintain OUTPERFORM

Valuation
Our target price for the stock is retained at RM3.68 based on 18.5x PER over FY13 FD EPS of 20 sen.

Risks
The global economic and weather uncertainty could affect the earnings of the company.


Source: Kenanga