INVESTMENT MERIT

- Significant margin improvement in trading division. We recently met up with Yee Lee management and returned feeling positive on the Company’s growth prospect. In the short term, the management plans to improve its trading division products portfolio in order to secure better margin. Throughout 2012, the Company has secured new distributorships from Reckitt Benckiser (UK consumer product company) and BIC (French stationery company). We like this strategy as it has shown good results so far with improved 1Q13 PBT margin of 3.22% against FY12’s 1.56% and FY11’s 1.35%.

- Good earnings from manufacturing division. The division’s main products include aerosol can, corrugated carton box, cooking oil and other palm oil based products. In 1Q13, better cooking oil margin above CPO prices have caused the division’s PBT to gain 54% YoY to RM6.2m with stable margin for its other products.

- Still cum dividend of 2.5 sen.  On 3-Jun-2013, the Company has announced a dividend of 2.5 sen (2.0 sen less 25% income tax and 0.5 sen tax exempt) with exdate of 16-July-2013. This should be an additional sweetener to the shareholder.

- Deeply undervalued, maintain Trading Buy on YEELEE with TP of RM1.50 based on Fwd. PE of 9x on its FY13E EPS of 16.7 sen. Our 9x Fwd. PE is in line with current small cap Fwd. PE. Despite strong FY13E earnings growth prospect of 33%, it is still trading at only 7.3x Fwd. PE (against industry average of 12x) and well below its Book Value of RM1.70.

SWOT ANALYSIS

- Strength:  Strong earnings track record with no historical loss since its listing.

- Weaknesses:  Margin affected by volatile CPO and other vegetable oil price.

- Opportunities: Turnaround in its trading division should enhance overall Group profit in the long run.

- Threats: Low barrier to entry for cooking oil business.

TECHNICALS

- Resistance: RM1.28 (R1), RM1.40 (R2)

- Support: RM1.13 (S1), RM0.97 (S2)

- Comments: YEELEE’s share price has held up relatively well despite the recent weakness in the broader market. The still bullish indicators also suggest that the share price is merely undergoing a pause in an overall uptrend. As such,  traders may aim for RM1.28 though a decisive breakout above this level would set our sights towards RM1.40 next.

BUSINESS OVERVIEW

YEELEE began its core business as an edible oil repacker in Malaysia in 1968. Since then it has grown into a fully integrated manufacturer and distributor and eventually gained its listing status in 1993. The main products of YEELEE include “Helang” brand cooking oil, “Vecorn” corn oil and “SunLico” sunflower seed oil. The Company also has a 32% associate stake in Spritzer.

BUSINESS SEGMENTS

The Group is organised into the following operating divisions:

- manufacturing (includes cooking oils, margarine, shortening, corrugated paper cartons, crude palm oil, kernel and general line tin cans)

- trading (includes edible oils, kernel and other consumer products)

- plantation (includes tea and palm oil)

- others (includes tourism related services and investment holding)

Source: Kenanga