QL participated in our recent RHB-OSK DMG Asean Hong Kong Corporate Day (ACD) in Singapore. We gather from management that 2013 will be a good year for the group’s marine division, buoyed by its regional expansion while the near-term performance of its integrated livestock farming (ILF) and palm oil activities (POA) segments should be dampened by the volatility in commodity prices. We expect the aggressive expansion in QL’s marine production, integrated poultry and palm oil divisions in Indonesia to propel earnings. Maintain BUY, with a revised FV of RM3.52.
Marine segment the growth fuel. QL has the capacity to produce 30k tonnes of surimi currently, of which 25k tonnes comes from Malaysia and 5k tonnes from its Indonesia unit in Surabaya. Recent expansion at the Surabaya marine products plant will boost its annual capacity in Indonesia from 5k to 10k tonnes. The group is also eyeing opportunities to acquire some local and regional surimi and surimi-based manufacturers to scale up this lucrative business. Recently, it invested in prawn aquaculture in Kudat in Sabah, which should take off by March 2014. Amid bountiful fish supply and stable demand for marine products, we expect the group’s marine segment to deliver better earnings y-o-y.
Marine segment the growth fuel. QL has the capacity to produce 30k tonnes of surimi currently, of which 25k tonnes comes from Malaysia and 5k tonnes from its Indonesia unit in Surabaya. Recent expansion at the Surabaya marine products plant will boost its annual capacity in Indonesia from 5k to 10k tonnes. The group is also eyeing opportunities to acquire some local and regional surimi and surimi-based manufacturers to scale up this lucrative business. Recently, it invested in prawn aquaculture in Kudat in Sabah, which should take off by March 2014. Amid bountiful fish supply and stable demand for marine products, we expect the group’s marine segment to deliver better earnings y-o-y.
ILF, POA hit by falling commodity prices. The group’s integrated livestock farming (ILF) division – its main revenue contributor – has been impacted by falling egg prices in the peninsula while the prices of corn and soybean have risen due to the recent drought in the US. As a consequence of the higher raw material cost and lower selling prices, ILF margins have thinned. Likewise, contributions from the group’s palm oil activities (POA) segment have weakened due to receding CPO prices.
Maintain BUY. The higher production cost arising from costlier raw materials and labour costs prompt us to lower our FY13 and FY14 forecasts by 11% and 13.7% respectively. We expect the group’s upcoming results to come in flat as the weaker showing from the ILF and POA divisions should be partially offset by the stronger marine division. Given the recent recovery in egg prices and as the group’s plantations in Indonesia reach maturity, we expect QL’s results to improve from 4QFY13. Maintain BUY, with our FV nudged down to RM3.52, based on 19X CY13 EPS.
KEY HIGHLIGHTS
Marine products manufacturing (MPM). On the home front, the group is building a new frozen surimi-based factory with an annual capacity of 15k tonnes in Hutan Melintang, Perak, which will be completed by mid-2013. Also in the pipeline is a new frozen fish cold room with an annual capacity of 2k tonnes in Endau, Johor, which is slated to be opened by 1QFY14.
Integrated livestock farming (ILF). QL aims to ramp up egg production at its integrated livestock farm in Indonesia from 450k eggs per day (epd) currently to 900k by March 2013, as well as increase the number of day-old chicks (docs) from 1.3m per month to 2.5m docs monthly. Meanwhile, its new feedmill in Indonesia – which will boast of a monthly capacity of 20k tonnes - is slated to be ready by April 2014. In view of recovering egg prices in Peninsular Malaysia and Indonesia along with stabilising raw feed material prices, the group’s ILF division should pick up pace in the near future.
Palm oil activities (POA). Currently, QL has 1.2k ha of mature plantations in Sabah and 20k ha under development in East Kalimantan in Indonesia. Elsewhere, we expect the contribution from its associate, Boilermech, to go up from FY14 onwards after QL raised its equity stake in the former from 35% to 40%. Moving forward, POA segment’s growth catalyst will mainly be its maturing Indonesian plantations and a potential JV with other CPO millers on a palm pelletisation project
Source: OSK
No comments:
Post a Comment