Period    4Q12/FY12

Actual vs. Expectations   The FY12 net profit (NP) of RM118.4m beat expectations, coming in above the consensus estimate of RM98.3m and our forecast of RM97.2m by 20.4% and 21.8% respectively. 

 

Dividends   A final single tier of 2.5 sen and special single tier dividend of 3.75 sen was declared for the quarter, bringing the total for FY12 to 12.5 sen, which was 14.7% above our estimate of 10.9 sen.

Key Result Highlights    QoQ, 4Q12 revenue and PBT increased by 11.3% and 57.4% respectively. The improvement was due mainly to higher sales in the cans (+12% QoQ) and cartons (+11% QoQ) divisions. A significant 7.8ppt PBT margin increase from the cans division helped to cushion the margin decline in the cartons and contract packaging divisions. The better margin was mainly due to improved economies of scale and a RM12.1m reversal of a previous impairment loss on inventory.  

 YoY, the 4Q12 revenue increased 7.0% on the back of higher sales registered by the cans (+9.0% YoY), cartons (+3.0% YoY) and contract packaging (+3.5%) divisions. Both the 4Q12 PBT and NP also improved by 69% and 212% YoY buoyed by the increased sales and the reversal of previous impairment loss on inventory from cans division.

 For the YTD, the FY12 revenue and PBT registered marginal growth of 7.2% and 2.5% YoY respectively. The PBT growth was mainly supported by the cartons division, which recorded a 27.3% YoY growth to mitigate the decline in the cans and contract packaging divisions. The growth was because of the higher revenue and improved operating efficiency in both the Malaysian and Vietnamese operations. Kian Joo certainly ended the year on a much exciting note with a double-digit NP growth of 13.8% YoY, due partially as well to a lower tax bracket of 12.1% as compared to 20.8% last year. 

 All in,  given such a good set of results, this may certainly help to soothe previous concerns over the impact of all the changes affecting the company last year. 

Outlook   Although there were hiccups in the cans division early last year, Kian Joo still made its way to a positive earnings growth at the end of the year. Thus, we remain positive on the company's ability to further improve its production efficiency to continue delivering organic growth ahead and also on its efforts to develop its regional markets.

Change to Forecasts       Maintaining our earnings forecast for now ahead of further updates from management.

Rating     Maintain OUTPERFORM

Valuation    Maintaining our TP of RM2.79. Our TP is based on an unchanged Fwd PER of 11.4x over the adjusted FY13 EPS of 24.5 sen. 

Risks   Volatile commodity prices will likely hit the company's earnings.   

Source: Kenanga