Price target RM3.00
Share price at 16 Feb RM2.45
Investment summary
We initiate coverage on QL Resources (QL) with a BUY rating and PT of RM3.00/share based on 9x FY10E PE: (1) We like QL for its proven management, strong profit track record (32% CAGR in FY04-08) and consistently high ROE (20-22% FY04-08). Successful implementation of its expansion plans in Indonesia and Vietnam provides impetus for next growth phase in FY11E. (2) In a recessionary economy, QL stands out for its defensive earnings qualities due to the inelasticity of consumer demand for staple food items. (3) The economic slowdown provides an opportunity for QL to gain market share by acquiring competitors at discounted valuations.
ST defensive; LT growth
Share price is trading at 8x FY10E PE, re-testing its 5-year historical trough PE band. QL is a LT growth play with defensive earnings. Share price could re-rate on successful expansion to regional markets.
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Showing posts with label QL Resources. Show all posts
Showing posts with label QL Resources. Show all posts
Saturday, 21 February 2009
Saturday, 21 June 2008
QL Resources - BUY - 22 May 2008 (Errata)
QL Resources - FY08 results just above estimates (Results Note)
Price: RM4.30
Target Price: RM5.35
Recommendation: BUY
· FY08 net profit of RM80.8m came in slightly above our forecast of RM75.8m by 7%, and above consensus estimate of RM73.5m by 10%. The higher FY08 net profit came mainly from larger earnings contribution from the integrated livestock farming (ILF) division. All business segments recorded stronger earnings though.
· Elevated price of feed commodities and poultry products largely responsible for the YoY, FY08 net profit increase of 28%. ILF's FY08 pretax profit rose by 37% driven by higher selling price of animal feed raw materials traded, as well as the higher price of poultry products (eggs in particular). The pretax profit of the marine products manufacturing (MPM) and CPO milling (CPOM) divisions increased by 16% and 7% due to higher price of surimi and CPO.
· Greater contribution from Sabah plantation and high CPO price, as well as higher price of marine products resulted in YoY, 4QFY08 net profit rising by 22%, on the back of a 23% increase in revenue. Pretax profit from the CPOM division was 119% higher YoY due to larger yield from QL's maturing 3,000 acre plantation and high price of CPO.
· QoQ, the 11% decline in 4QFY08 net profit is in line with traditional seasonality. The monsoon weather reduced fish catch and lowered FFB harvest, resulting in a 21% and 13% QoQ decline in MPM and CPOM pretax profit. The ILF segment's pretax profit also decreased by 8% due to the lower volume of feed commodities traded.
· Final dividend of 13% proposed under the single-tier tax system. With additional 110m new bonus issue shares, this translates into an FY08 DPS of 6.5 sen. At the current share capital of 220m, the FY08 DPS would be 9.75 sen, 34% higher than FY07 net DPS of 7.3 sen. FY08 dividend yield of 2.3%.
· Revising FY09 and FY10 net profit estimates upwards by 7% for both years to take into account higher contribution of the ILF division. We are raising our FY09 and FY10 estimates for the price of poultry products by an average of 5%, and increasing the FY09 and FY10 FFB yield for QL's Sabah plantation to 15mt/acre from 10/mt acre.
· Re-iterate our BUY recommendation with revised target price of RM5.35 utilising our previous 12x PER applied to raised FY09 EPs of 44.7 sen. Earnings have the potential to surprise on the upside as QL's aggressive expansion plan bears fruit.
KENANGA INVESTMENT BANK BERHAD (15678-H)
Price: RM4.30
Target Price: RM5.35
Recommendation: BUY
· FY08 net profit of RM80.8m came in slightly above our forecast of RM75.8m by 7%, and above consensus estimate of RM73.5m by 10%. The higher FY08 net profit came mainly from larger earnings contribution from the integrated livestock farming (ILF) division. All business segments recorded stronger earnings though.
· Elevated price of feed commodities and poultry products largely responsible for the YoY, FY08 net profit increase of 28%. ILF's FY08 pretax profit rose by 37% driven by higher selling price of animal feed raw materials traded, as well as the higher price of poultry products (eggs in particular). The pretax profit of the marine products manufacturing (MPM) and CPO milling (CPOM) divisions increased by 16% and 7% due to higher price of surimi and CPO.
· Greater contribution from Sabah plantation and high CPO price, as well as higher price of marine products resulted in YoY, 4QFY08 net profit rising by 22%, on the back of a 23% increase in revenue. Pretax profit from the CPOM division was 119% higher YoY due to larger yield from QL's maturing 3,000 acre plantation and high price of CPO.
· QoQ, the 11% decline in 4QFY08 net profit is in line with traditional seasonality. The monsoon weather reduced fish catch and lowered FFB harvest, resulting in a 21% and 13% QoQ decline in MPM and CPOM pretax profit. The ILF segment's pretax profit also decreased by 8% due to the lower volume of feed commodities traded.
· Final dividend of 13% proposed under the single-tier tax system. With additional 110m new bonus issue shares, this translates into an FY08 DPS of 6.5 sen. At the current share capital of 220m, the FY08 DPS would be 9.75 sen, 34% higher than FY07 net DPS of 7.3 sen. FY08 dividend yield of 2.3%.
· Revising FY09 and FY10 net profit estimates upwards by 7% for both years to take into account higher contribution of the ILF division. We are raising our FY09 and FY10 estimates for the price of poultry products by an average of 5%, and increasing the FY09 and FY10 FFB yield for QL's Sabah plantation to 15mt/acre from 10/mt acre.
· Re-iterate our BUY recommendation with revised target price of RM5.35 utilising our previous 12x PER applied to raised FY09 EPs of 44.7 sen. Earnings have the potential to surprise on the upside as QL's aggressive expansion plan bears fruit.
KENANGA INVESTMENT BANK BERHAD (15678-H)
QL Resources - BUY - 22 May 2008
QL Resources - FY08 results just above estimates (Results Note)
Price: RM4.30
Target Price: RM5.35
Recommendation: BUY
· FY08 net profit of RM80.8m came in slightly above our forecast of RM75.8m by 7%, and above consensus estimate of RM73.5m by 10%. The higher FY08 net profit came mainly from larger earnings contribution from the integrated livestock farming (ILF) division. All business segments recorded stronger earnings though.
· Elevated price of feed commodities and poultry products largely responsible for the YoY, FY08 net profit increase of 28%. ILF's FY08 pretax profit rose by 37% driven by higher selling price of animal feed raw materials traded, as well as the higher price of poultry products (eggs in particular). The pretax profit of the marine products manufacturing (MPM) and CPO milling (CPOM) divisions increased by 16% and 7% due to higher price of surimi and CPO.
· Greater contribution from Sabah plantation and high CPO price, as well as higher price of marine products resulted in YoY, 4QFY08 net profit rising by 22%, on the back of a 23% increase in revenue. Pretax profit from the CPOM division was 119% higher YoY due to larger yield from QL's maturing 3,000 acre plantation and high price of CPO.
· QoQ, the 11% decline in 4QFY08 net profit is in line with traditional seasonality. The monsoon weather reduced fish catch and lowered FFB harvest, resulting in a 21% and 13% QoQ decline in MPM and CPOM pretax profit. The ILF segment's pretax profit also decreased by 8% due to the lower volume of feed commodities traded.
· Final dividend of 13% proposed under the single-tier tax system. The 6.5 sen FY08 DPS is slightly lower YoY (by 9%) than FY07 net DPS of 7.3 sen as the firm conserves cash for its aggressive expansion plans that include a Vietnamese layer farm, Indonesian plantation, and prospective marine plants in Sarawak and Indonesia.
· Revising FY09 and FY10 net profit estimates upwards by 7% for both years to take into account higher contribution of the ILF division. We are raising our FY09 and FY10 estimates for the price of poultry products by an average of 5%, and increasing the FY09 and FY10 FFB yield for QL's Sabah plantation to 15mt/acre from 10/mt acre.
· Re-iterate our BUY recommendation with revised target price of RM5.35 utilising our previous 12x PER applied to raised FY09 EPs of 44.7 sen. Any FY09 earnings surprise is likely to be on the upside as QL's acquisitions begin to bear fruit.
KENANGA INVESTMENT BANK BERHAD (15678-H)
Price: RM4.30
Target Price: RM5.35
Recommendation: BUY
· FY08 net profit of RM80.8m came in slightly above our forecast of RM75.8m by 7%, and above consensus estimate of RM73.5m by 10%. The higher FY08 net profit came mainly from larger earnings contribution from the integrated livestock farming (ILF) division. All business segments recorded stronger earnings though.
· Elevated price of feed commodities and poultry products largely responsible for the YoY, FY08 net profit increase of 28%. ILF's FY08 pretax profit rose by 37% driven by higher selling price of animal feed raw materials traded, as well as the higher price of poultry products (eggs in particular). The pretax profit of the marine products manufacturing (MPM) and CPO milling (CPOM) divisions increased by 16% and 7% due to higher price of surimi and CPO.
· Greater contribution from Sabah plantation and high CPO price, as well as higher price of marine products resulted in YoY, 4QFY08 net profit rising by 22%, on the back of a 23% increase in revenue. Pretax profit from the CPOM division was 119% higher YoY due to larger yield from QL's maturing 3,000 acre plantation and high price of CPO.
· QoQ, the 11% decline in 4QFY08 net profit is in line with traditional seasonality. The monsoon weather reduced fish catch and lowered FFB harvest, resulting in a 21% and 13% QoQ decline in MPM and CPOM pretax profit. The ILF segment's pretax profit also decreased by 8% due to the lower volume of feed commodities traded.
· Final dividend of 13% proposed under the single-tier tax system. The 6.5 sen FY08 DPS is slightly lower YoY (by 9%) than FY07 net DPS of 7.3 sen as the firm conserves cash for its aggressive expansion plans that include a Vietnamese layer farm, Indonesian plantation, and prospective marine plants in Sarawak and Indonesia.
· Revising FY09 and FY10 net profit estimates upwards by 7% for both years to take into account higher contribution of the ILF division. We are raising our FY09 and FY10 estimates for the price of poultry products by an average of 5%, and increasing the FY09 and FY10 FFB yield for QL's Sabah plantation to 15mt/acre from 10/mt acre.
· Re-iterate our BUY recommendation with revised target price of RM5.35 utilising our previous 12x PER applied to raised FY09 EPs of 44.7 sen. Any FY09 earnings surprise is likely to be on the upside as QL's acquisitions begin to bear fruit.
KENANGA INVESTMENT BANK BERHAD (15678-H)
Saturday, 3 May 2008
QL Resources: X'mas comes early
QL Resources (QLG MK; Buy: TP: RM5.05)
Dear all,
* QL's proposed 1-for-2 bonus issue should be completed in 2Q08 while a share buy-back program could be EPS-accretive as management has given a commitment to cancel all shares bought back immediately.
* The company is on track for a highly fruitful FY09 for investors as profits continue to grow and improve capital management activities.
* Maintain Buy. Our unchanged RM5.05 TP (10x FY10 PER) offers upside bias as its share buy-back could raise EPS growth further.
Dear all,
* QL's proposed 1-for-2 bonus issue should be completed in 2Q08 while a share buy-back program could be EPS-accretive as management has given a commitment to cancel all shares bought back immediately.
* The company is on track for a highly fruitful FY09 for investors as profits continue to grow and improve capital management activities.
* Maintain Buy. Our unchanged RM5.05 TP (10x FY10 PER) offers upside bias as its share buy-back could raise EPS growth further.
Sunday, 20 April 2008
QL Resources - BUY - 16 Apr 2008
QL Resources – Bonus issue & share buyback (Company Update)
Price: RM4.28 (RM2.85)*
Target Price: RM4.80 (RM3.30)*
Recommendation: BUY
* Ex-Bonus
· QL Resources announced a bonus issue of 110m new shares of RM0.50 each on the basis of 1 new share for every 2 existing shares held, to be completed by 2QCY08. The firm will be capitalising up to RM40m from its share premium account (RM147.5m as at 31 March 2007) and RM15m from retained earnings (RM40.4m) for the bonus issue.
· The bonus issue would eventually raise its market capitalisation and would improve liquidity by raising share capital to 330m from 220m. QL aims to raise the average traded volume of its stock for the past 3 months from 145,430 shares.
· Share buyback for up to 33m shares, pursuant to the bonus issue. The purchase price of up to 10% of the enlarged share capital will not exceed 15% of the 5-day weighted average market price prior to the date of purchase. The firm has not confirmed whether it intends to cancel the shares or hold them as treasury shares. The exercise will be financed by bank borrowings (not exceeding the sum of retained profits and share premium) and internal funds.
· FY08 and FY09 net profit estimates unchanged. The corporate exercises will not have any material effect on earnings. We believe that the firm is on track to achieving our forecast FY08 net profit growth of 20%. FY08 and FY09 EPS adjusted for the bonus issue would be lower at 23.0 sen and 27.2 sen, from 34.5 sen and 40.8 sen respectively.
· Re-iterate BUY recommendation with adjusted target price of RM3.30. Our target price is derived from previous 12x PER applied to FY09 EPS of 27.2 sen adjusted for the bonus issue. QL’s consistent resource-based earnings with double-digit net profit growth for the past 5 years offers some surety given current market conditions. Potential FY08 dividend yield of 2.6% also adds some attraction to the stock.
KENANGA INVESTMENT BANK BERHAD (15678-H)
Price: RM4.28 (RM2.85)*
Target Price: RM4.80 (RM3.30)*
Recommendation: BUY
* Ex-Bonus
· QL Resources announced a bonus issue of 110m new shares of RM0.50 each on the basis of 1 new share for every 2 existing shares held, to be completed by 2QCY08. The firm will be capitalising up to RM40m from its share premium account (RM147.5m as at 31 March 2007) and RM15m from retained earnings (RM40.4m) for the bonus issue.
· The bonus issue would eventually raise its market capitalisation and would improve liquidity by raising share capital to 330m from 220m. QL aims to raise the average traded volume of its stock for the past 3 months from 145,430 shares.
· Share buyback for up to 33m shares, pursuant to the bonus issue. The purchase price of up to 10% of the enlarged share capital will not exceed 15% of the 5-day weighted average market price prior to the date of purchase. The firm has not confirmed whether it intends to cancel the shares or hold them as treasury shares. The exercise will be financed by bank borrowings (not exceeding the sum of retained profits and share premium) and internal funds.
· FY08 and FY09 net profit estimates unchanged. The corporate exercises will not have any material effect on earnings. We believe that the firm is on track to achieving our forecast FY08 net profit growth of 20%. FY08 and FY09 EPS adjusted for the bonus issue would be lower at 23.0 sen and 27.2 sen, from 34.5 sen and 40.8 sen respectively.
· Re-iterate BUY recommendation with adjusted target price of RM3.30. Our target price is derived from previous 12x PER applied to FY09 EPS of 27.2 sen adjusted for the bonus issue. QL’s consistent resource-based earnings with double-digit net profit growth for the past 5 years offers some surety given current market conditions. Potential FY08 dividend yield of 2.6% also adds some attraction to the stock.
KENANGA INVESTMENT BANK BERHAD (15678-H)
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