QL (7084) - QL Resources - A visit to QL Kota Kinabalu
Target RM4.54 (Stock Rating: ADD)
Last week, we visited QL’s marine plant and poultry farm in Kota Kinabalu, Sabah, where the company raises broiler chickens and produces surimi, fishmeal and frozen fish. We found the highly automated plant to be clean and well organised. We raise our FY16-17 EPS forecasts, mainly to factor in a stronger US$ vs. RM, lower raw material costs and new contributions from recent acquisition KSSB. Our target price (based on an unchanged consumer average of 23x CY16 P/E) is raised accordingly. We maintain our Add call. Rerating catalysts include expansion plans and investors’ preference for resilient stocks as consumer spending weakens. QL remains our top sector pick.
We raise our FY16-17 EPS forecasts, mainly to factor in a stronger US$ vs. RM, lower raw material costs and new contributions from recent acquisition KSSB. Our target price (based on an unchanged consumer average of 23x CY16 P/E) is raised accordingly. We maintain our Add call. Rerating catalysts include expansion plans and investors’ preference for resilient stocks as consumer spending weakens. QL remains our top sector pick.
Clean and well-managed plant
QL’s broiler farm and marine plant are clean, organised, equipped with automated machines and comply with EURO and HACCP standards. For hygiene and disease control purposes, we were asked to put on lab coats, boots and caps before entering the premises. Our car was also sanitised before entering the farm by an automatic sanitiser. At the marine plant, our boots were sanitised as we walked from one division to another. The clean and organised farms and plants as well as the safety measures are not unexpected for a well-managed company like QL. Aside from the facilities’ international standards, the employees (including Dr Chia Song Kun’s nephews) managing the farms and plants are well-trained and know the operation well. This gives us comfort that each division is in good hands and the business can run smoothly even without the close guidance of managing director, Dr Chia.
Continuous expansion
QL is planning for another broiler and shrimp farm, and targets to increase its total egg production from the current 4.4m eggs per day (epd) to 5.25m epd in FY16. In view of the growing business, the company has decided to build its own poultry and shrimp processing plants, as well as shrimp nurseries and hatcheries, to reduce costs. As for its marine business, it has acquired land in Kulai, Johor to cater for future demand for surimi-based products. It is also expanding its fishmeal and surimi capacity in Indonesia.
Expecting a better 4Q15
We are anticipating better yoy results in 4QFY15, driven by stronger demand and better prices for marine products, higher egg prices, as well as more FFB processed from Indonesia.
Source: CIMB Daybreak - 13 March 2015
Target RM4.54 (Stock Rating: ADD)
Last week, we visited QL’s marine plant and poultry farm in Kota Kinabalu, Sabah, where the company raises broiler chickens and produces surimi, fishmeal and frozen fish. We found the highly automated plant to be clean and well organised. We raise our FY16-17 EPS forecasts, mainly to factor in a stronger US$ vs. RM, lower raw material costs and new contributions from recent acquisition KSSB. Our target price (based on an unchanged consumer average of 23x CY16 P/E) is raised accordingly. We maintain our Add call. Rerating catalysts include expansion plans and investors’ preference for resilient stocks as consumer spending weakens. QL remains our top sector pick.
We raise our FY16-17 EPS forecasts, mainly to factor in a stronger US$ vs. RM, lower raw material costs and new contributions from recent acquisition KSSB. Our target price (based on an unchanged consumer average of 23x CY16 P/E) is raised accordingly. We maintain our Add call. Rerating catalysts include expansion plans and investors’ preference for resilient stocks as consumer spending weakens. QL remains our top sector pick.
Clean and well-managed plant
QL’s broiler farm and marine plant are clean, organised, equipped with automated machines and comply with EURO and HACCP standards. For hygiene and disease control purposes, we were asked to put on lab coats, boots and caps before entering the premises. Our car was also sanitised before entering the farm by an automatic sanitiser. At the marine plant, our boots were sanitised as we walked from one division to another. The clean and organised farms and plants as well as the safety measures are not unexpected for a well-managed company like QL. Aside from the facilities’ international standards, the employees (including Dr Chia Song Kun’s nephews) managing the farms and plants are well-trained and know the operation well. This gives us comfort that each division is in good hands and the business can run smoothly even without the close guidance of managing director, Dr Chia.
Continuous expansion
QL is planning for another broiler and shrimp farm, and targets to increase its total egg production from the current 4.4m eggs per day (epd) to 5.25m epd in FY16. In view of the growing business, the company has decided to build its own poultry and shrimp processing plants, as well as shrimp nurseries and hatcheries, to reduce costs. As for its marine business, it has acquired land in Kulai, Johor to cater for future demand for surimi-based products. It is also expanding its fishmeal and surimi capacity in Indonesia.
Expecting a better 4Q15
We are anticipating better yoy results in 4QFY15, driven by stronger demand and better prices for marine products, higher egg prices, as well as more FFB processed from Indonesia.
Source: CIMB Daybreak - 13 March 2015
