News QL Resources (“QL”) announced that it had
acquired a 100% equity interest in Zhongshan True Taste Food Industrial Co. Ltd
(“ZC”) through its wholly-owned subsidiary, QL Lian Hoe (S) Pte Ltd for a cash
consideration of RMB18.8m or RM9.4m from Li Peishan.
ZC is principally involved in the business of producing
various kinds of quick-frozen minced fish fillets, other flavoured foods,
purchasing, processing and selling agricultural products in China.
The rationale of the acquisition is in line with QL’s expansion
plan to venture into the China market for its marine products manufacturing
division.
Comments The acquisition is expected as it was
mentioned in our report dated 22 Feb 2013, and is mainly for the aim of
penetrating the huge hypermarket base in China.
As at Dec 2012, QL has cash & balances and borrowings of
RM101.6m and RM741.9m respectively. Given the low investment cost of RM9.4m, it
will not have any material impact to the balance sheet and the net gearing
ratio of 0.74x.
Assuming a similar ROA of 7.9% by benchmarking it to QL’s
own ROA, ZC should potentially produce a return of RM0.7m per annum. Its
contribution to QL would be minimal at this juncture.
Outlook Nevertheless,
given the huge market in China, it would be a good opportunity for QL to
explore the market through this low-cost acquisition to build a strong
foundation for its future growth there.
Forecast As
we do not expect any material contribution from ZC to QL’s earnings, we are
thus maintaining our FY13-14E NPs of RM138m-RM157m
Rating Maintain OUTPERFORM
Valuation Our TP remains unchanged at RM3.40 based on
a FD FY14E PER of 18.5x.
Risks The global economic and weather
uncertainties.
Source: Kenanga
No comments:
Post a Comment