PETALING JAYA: Rhone Ma Holdings Bhd
is expected to post softer earnings in the coming second quarter (2Q23) due to normalisation of the provision for trade receivables and impact of increased cost pressures, says Affin Hwang Investment Bank Research.
The research house stated that despite having a positive outlook on Rhone Ma’s long-term business outlook, it expects inflationary pressure to weigh on its 2023 to 2024 estimated profit margins and cap its profit growth trajectory.
In 1Q23, Rhone Ma reported a 5% year-on-year (y-o-y) rise in revenue to RM48.5mil, driven by contributions from its animal health and food ingredient businesses that more than offset reduced income from the dairy and other businesses.
Earnings before interest, taxes, depreciation and amortisation, however, decreased 7.1% y-o-y to RM5.7mil due to the decline in gross profit brought on by higher material costs.
Nevertheless, Rhone Ma’s core net profit for the 1Q23 accounted for 27.6% of Affin Hwang’s Research full-year earnings prediction. The company reported a net profit of RM3.4mil for the period in line with the research house’s expectations and the consensus.
Quarter-on-quarter (q-o-q) Rhone Ma’s 1Q23 revenue fell 9.6% y-o-y due to lower contributions from all its various segments. Against a lower base in 4Q22, 1Q23 core net profit rebounded by 43% q-o-q driven by improved performance from the companion animals and livestock segments and a positive minority interest due to losses at the dairy and other businesses, Affin Hwang added.
The research house has maintained a “hold” call on Rhone Ma with a higher target price of 75 sen per share taking valuation forward into FY24 but unchanged valuation multiple of 12 times price to earnings.
