INVESTMENT HIGHLIGHTS

• FY17 results within expectation

• Full year earnings declined by 26% to RM63.6m yoy

• Expect FY18F/FY19F earnings growth of 31%/13%

• Maintain BUY and TP of RM3.46

FY17 results within expectation. Can-One Bhd’s (Can-One) FY17 earnings of RM63.6m met our expectation at 97% of our full year estimates. A dividend of 4.0 sen was announced for the financial year, which is 1.0 sen higher than our previous expectation.

Full year earnings declined by 26% to RM63.6m yoy mainly due to higher raw material costs for its tin can division as well as the food division. The dip in net profit is also attributed to the lower contribution from Kian Joo Can Factory (KJCF). Meanwhile, revenue jumped 22.4% to RM1136.3m yoy, supported by growth from all the divisions, namely: general cans (+22%yoy), food (+22%yoy) and international trading (+15%yoy).

4QFY17 net profit up by 10.4%qoq to RM17.6m. Contribution from KJCF has improved during the quarter, boosting Can-One’s net profit. Revenue increased marginally to RM300.8m as the food division sales increased by 2% to RM207.2m. Better sales of tin cans are offset by weaker sales of jerry cans resulting in a marginal decline in the cans division to RM124.8m. Higher distribution costs for the food division affected operating margins.

Expect FY18F/FY19F earnings growth of 31%/13%. We expect earnings growth of 31% in FY18F and 13% in FY19F due to better operational efficiency amid higher volume and better economies of scale. Meanwhile, sugar prices have eased since early 2018.

Earnings estimates unchanged. We keep our FY18F earnings forecast unchanged while we introduce our FY19 estimates in view of the in-line estimates.

Maintain BUY and TP of RM3.46. Our TP of RM3.46 is based on 8x FY18F EPS of 43.2 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 - 1 Mar 2018