INITIATION REPORT 

Teo Seng Capital Berhad ("TSCB") is engaged in investment holding and provision of management services. The Company is a subsidiary of Advantage Valuations Sdn. Bhd. The Company's ultimate holding com-pany is Leong Hup Holdings Berhad. The Company operates in three business segments: investment holding segment, trading of pet food, medicine and other related products segment, and poultry farming.

INVESTMENT RISKS 

Risks to our recommendation and target price include: i) rising feed prices, ii) higher USDMYR exchange rates, iii) an increase in the general level of interest rates, iv) weak demand for eggs due to lower dispos-able income and v) a recurrence of Avian flu in Malaysia which would reduce egg production.

RECOMMENDATION 

We reduce our recommendation on Teo Seng Capital Berhad ("TSCB") to HOLD whilst reducing our fair value estimate to MYR 0.70. Margins at many of the listed poultry companies have been shrinking and TSCB is no exception. After another quarter or two of low margins, the picture may begin to brighten for TSCB. The company has invested heavily in new capacity, however demand increases have not kept pace with capacity. It may take a few quarters for profits to recover to healthier levels. Value investors will want to monitor this stock.

Source: Wilson & York Securities Research - 23 Aug 2017