Review

• Excluding the unrealised forex and other non-core items, Kumpulan Fima Berhad (KFIMA)’s 1QFY20 core net profit increased by 27.6% YoY to RM10.9mn, accounting for 33% of our full-year earnings estimates. We deem the result broadly in-line as we expect a weak 2QFY20 due to shorter working days and weaker plantation segment.

• Manufacturing: Despite lower revenue (-2.2% YoY), 1QFY20 PBT increased by 8.6% YoY to RM4.4mn. Note that this division has recorded decrease in volume of certain travel documents in 1QFY20.

• Plantation: Revenue increased by 24.4% YoY to RM27.8mn, driven by higher sales volume of CPO and production of FFB. CPO sales volume increased by 33.6% YoY to 12k tonnes. However, the average selling price of CPO decreased to RM1,966/tonne (-6.5% YoY). This division registered a LBT of RM1.9mn, mainly due to higher manuring cost incurred by its Indonesian subsidiary.

• Bulking: 1QFY20 PBT increased by 16.0% YoY to RM10.6mn, underpinned by 24.5% growth in revenue. The commendable results were driven by higher contribution from edible oil and industrial chemicals product.

• Food: This segment recorded a PBT of RM4.4mn in 1QFY20 compared to RM1.6mn in 1QFY19. The improvement was underpinned by higher sales of tuna and mackerel products.

• There was no dividend declared for the quarter under review.

Impact

• No change to our earnings forecasts

Outlook

• Management expects to secure more long-term contracts with customers as well as higher margin products in the bulking segment.

• Meanwhile, balance sheet remained healthy with RM284mn net cash as at 31 June 2019, translates into RM1.01/share.

Valuation

• Maintain KFIMA’s DDM valuation at RM1.89/share. The TP implies a forward CY20 PER of 14.6x. Maintain HOLD.

Source: TA Research - 28 Aug 2019