QL Resources Bhd
(May 27, RM4.00)
Maintain buy with target price under review, previous target price was RM4: Full-year core earnings for financial year 2015 ended March (FY15) grew a decent 14%, as all segments recorded growth.
Notably, integrated livestock farming (ILF) revenue grew 8% while notching up a 6% profit before tax (PBT) margin as the group ramped up feed material trading.
The marine products manufacturing division continued its run as the strongest growing segment at 18% top line growth and a 16.5% rise in PBT, as the group expanded surimi (fish paste) capacity against a backdrop of strong surimi prices, plus its expansion into aquaculture.
Palm oil activities’ (POA) full-year PBT contribution also grew 24% to RM13 million from RM9 million, due to strong associate contributions from 41%-owned Boilermech Holdings .
A first and final dividend of 4.25 sen was proposed for the year, a 21% increase from the 3.5 sen in FY14.
On outlook, QL is currently expanding capacity of its surimi products, feedmills, and shrimp farming/aquaculture, which are positive indicators for continued earnings growth. We understand that RM300 million is planned for capital expenditure for FY16.
QL’s 9,000ha of palm oil plantations in Kalimantan, Indonesia have a young age profile of four to seven years. While currently depressed by low crude palm oil (CPO) prices, the segment should see better prospects longer term if higher prime-age yields coincide with a recovery in CPO prices.
Risks include ILF margins exposed to prices of corn and soybeans, which are the major feed inputs. The POA division is naturally affected by CPO prices and volatility in chicken egg prices. — AllianceDBS Research, May 27
QL (7084) - QL expands capacity, sees continued earnings growth
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