Able Global Berhad's (AGB) 3QFY24 net profit rose by 9.4% YoY to RM17.7m, driven by improved contributions from the F&B segment. After adjusting for non-core items, AGB's core net profit stood at RM21.9m, bringing its YTD 9M core net profit to RM55.7m. The results exceeded both our and consensus estimates, accounting for 86% and 87% of full-year forecasts, respectively. The variance in our forecasts was mainly due to stronger-than-expected demand for dairy products. Consequently, we raise our earnings forecast by 12-17% for FY24-26F, mainly to account for robust dairy demand. We maintain our Outperform call with a higher SOTP-based TP of RM2.65, after pegging the F&B segment PE to 10x, which aligns with its 5-year average forward PE (see figure 1). Additionally, AGB declared a dividend per share of 2 sen, bringing the YTD dividend declared to 6 sen.

• 3QFY24 revenue rose by 9.7% YoY to RM193.9m, supported by the stronger performance of its F&B segment (+15.4% YoY). This growth was mainly driven by higher sales volume and lower raw material costs. Nevertheless, this was partly offset by a drop in revenue from the Tin Manufacturing segment, which decreased by 14.2% YoY to RM29m, due to lower consumer demand amidst an increasingly competitive market.
• 3QFY24 core net profit grew by 32.5% YoY to RM21.9m. We attribute this improvement in results to an increase in production efficiency, driven by stronger sales in the F&B segment and lower raw material prices. As a result, the F&B segment's PBT margin increased by 3.7 ppts to 14.8%. However, the Tin Manufacturing segment's PBT fell to RM0.5m, due to a slowdown in demand and foreign exchange losses. Meanwhile, AGB's Mexico operations continue to post losses due to unrealised forex losses. We gather that its Mexico operations is running at a utilisation rate of 30-35%, which is above its breakeven levels of 25-30%.
• Outlook. We continue to expect AGB to post stronger earnings sequentially, underpinned by resilient demand for dairy products (condensed milk, UHT and milk powder), driven by organic growth from existing customers and contributions from newly secured customers. While dairy raw material prices have been trending upwards, we do not anticipate a significant impact on AGB's F&B segment margins, as the decline in sugar prices is expected to offset the negative effects. Should the new tariff on Mexico be implemented, we believe the impact on the group's earnings will remain minimal, as we understand that exports to the US from Mexico account for 10-15% of its sales.

Source: PublicInvest Research - 28 Nov 2024