Investment Highlights

• 9MFY17 results in-line

• Ytd results fell by 25% due to high raw material costs

• 3QFY17 net profit up by 6.2%qoq to RM15.9m

• Maintain BUY and TP of RM3.46

9MFY17 results in-line. Can-One Bhd’s (Can-One) 9MFY17 earnings of RM46.0m met our expectation at 76.7% of our full year estimates. No dividend was declared as expected as dividends are usually announced once in a financial year in the fourth quarter.

Ytd results fell by 25%yoy due to high raw material costs as well as lower contribution of Kian Joo Can Factory (KJCF). That is despite revenue which jumped by 26.5% to RM835.5m. Higher sales are seen across all its segments due to better sales execution. Food products sales grew 29% while general cans soared by 68.5%. Unfortunately, this does not translate into bottomline growth mainly due to a hike in raw material prices earlier in the year.

3QFY17 net profit up by 6.2%qoq to RM15.9m. Despite the lower ytd profit, improvement is seen in 3QFY17 as operating profit increased by 19.8%qoq. This is mainly due to the improvement in the food product segment as result of higher revenue, better sales mix and lower qoq material costs.

Earnings estimates unchanged. We are keeping our FY17F/FY18F earnings forecast as Can-One’s results are within expectations. We make no changes to our assumption as we believe that Can-One’s sales strategy and operational efficiency will yield better results in the quarters to come.

Maintain BUY and TP of RM3.46. Our TP of RM3.46 is based on 8x FY18F EPS of 43.22 sen. Our valuation method of 8x PER based on Can-One’s two-year average PE band is unchanged. We like Can-One for its attractive valuation, long-term prospects and earnings resilience as a proxy to the consumer staple industry.

Source: MIDF Research - 30 Nov 2017