Able Global (formerly known as Johore Tin) was listed on Bursa Malaysia in the year 2003. The group expanded into the Food and Beverage segment via the acquisition of Able Dairies SB. We expect Able Global to register net earnings of RM45.6m and RM54.4m for FY21 and FY22 respectively, driven by strong demand and new capacity. BUY with a target price of RM2.41 based on sum of parts (SOP) valuation.

Able Food SB was incorporated to mark its entry into the dry milk powder processing and packaging arena. The company’s inhouse brands include “Able Farm”, “TarikTarik”, and “AF Able lac”. Able Dairies Mexico was established in 2018 as the group’s first overseas venture to cater to North America, LATAM and Caribbean markets, complementing the group’s aspirations of becoming a truly global force to reckon within the food and beverage sector.

For Tin Cans segment, demand is expected to grow marginally but will remain challenging in the short-term. Raw material prices are expected to continue with the uptrend and the high freight costs will put additional pressure on profit margin in the short term.

In early 2021, the company acquired 297 acres of freehold land in Kuala Langat, Selangor for RM168.9m, to expand its manufacturing operations as well as for industrial property development activities.

Balance sheet is strong with net cash of RM55.9m as at 30 Jun 2021. The company has been consistently paying dividend in the past 5 years with payout ratio of more than 40%. Based on our estimates, Able Global is expected to pay 5.9 sen and 7.0 sen for FY21 and FY22 respectively, translating into yield of 3.5% and 4.2%. Our BUY call is premised on (i) expansion in Mexico which will generate additional earnings in the future; (ii) stable demand of tin can segment; and (iii) decent dividend yield.

Source: Rakuten Research - 23 Sept 2021