KEY INVESTMENT HIGHLIGHTS

• FY20 earnings of RM239.3m was within our and consensus’ expectations

• Record annual earnings of RM239.3m primed on revenue that rose 14.8%yoy to a high of RM4.2b.

• 4QFY20 net profit is almost unchanged at RM43.0m

• One bonus share for every two shares held

• Maintain NEUTRAL with a revised TP RM9.21 (from RM7.46)

FY20 earnings of RM239.3m was within our and consensus’ expectations. QL Resources Berhad’s (QL) FY20 net profit made up 94% of ours and 96% of consensus’ full year estimates. A dividend of 4.5sen was announced, which is lower than that we had expected.

Record annual earnings of RM239.3m primed on revenue that rose 14.8%yoy to a high of RM4.2b. For the full year, revenue jumped to record high of RM4.2b (+14.8%yoy) lifting net profit to RM239.3m, which was higher by +6%yoy. This can be attributed the climb in sales for the marine product manufacturing (MPM) and integrated livestock farming (ILF) segments. However, the Palm Oil Activities (POA) segment took a breather due to lower fresh fruit bunch processed. On top of that, the POA segment was also hit by forex losses. MPM sales jumped due to higher contributions from surimi, fishmeal and surimi-based products. Meanwhile, the ILF segment saw increasing contribution from the Regional and Sabah poultry operation, higher feed raw material trade and Family Mart.

4QFY20 net profit was almost unchanged at RM43.0m compared to a year ago premised on revenue that rose +8.4%yoy to RM979.4m. This can be attributed to higher finance cost (+26.6%yoy) and lower contribution from associates (-39.2%yoy).

One bonus share for every two shares held. QL has also announced that it is giving out bonus shares, which is expected to enlarge its share base from 1.6b to 2.4b, potentially improving its liquidity going forward.

Impact to earnings. We maintain our FY21F and FY22F earnings forecasts as there are no major surprises from QL’s results.

Target Price. Following QL’s consistent growth over the past few years, we tweak our DCF-derived TP to RM9.21 (previously RM7.46) as we adjusted our terminal growth rate to 6.0% from 5.9% previously. Our WACC assumption of 7.0% is unchanged. Our TP may be adjusted to RM6.15, after the listing of new bonus shares

Source: MIDF Research - 30 Jun 2020