Kenanga Research has raised its FY24 to FY25 net profit forecasts by 0.5% and 1.8%, respectively,
PETALING JAYA: QL Resources Bhd
’s growth will continue to be driven by its livestock farming and marine products, while the plantation and clean energy segments will focus on the environment, social and governance (ESG) aspects, says Kenanga Research.
The group will also expand its convenience store chain (CVS) at a more measured pace, adjusting to the softer consumer sentiment.
Kenanga Research said it felt assured about the group’s near-term prospects based on its meeting with QL Resources’ management recently.
Some of the key takeaways include the group’s livestock farming segment that is likely to maintain momentum, supported by a government subsidy of 10 sen per egg and a price ceiling of 41 sen to 45 sen for A to C grade eggs.
“This subsidy is currently projected to persist through the first half of 2024 (1H24), but may be subject to a 2H24 review, in our view, considering the anticipated stabilisation in egg supply.
“Should the subsidy be withdrawn, egg prices could rise by an additional 10 sen, depending on the grade.
“Overall, any demand impact from these changes is expected to be minimal, as eggs are a staple food item for the general public,” it added.
In addition, the group’s marine product division is set for growth in the third quarter of financial year 2024 (FY24), driven by higher fish landings due to El Nino and better performance of its surimi-based products, facilitated by lower input costs.
Expansion projects in Surabaya, Indonesia and Johor are on schedule for completion in FY24, significantly enhancing its surimi-based production, Kenanga Research noted.
Meanwhile, QL Resources’ plantation and clean energy division segment will continue to be driven by higher contribution from its 52.57%-owned subsidiary, BM Greentech, which is expected to continue focusing on higher-margin segments (over 10%) such as water treatment and solar energy, benefitting from various government energy initiatives.
On the other hand, the plantation segment is likely to remain lacklustre due to softening crude palm oil prices.
The group’s CVS, which is anchored by FamilyMart outlets, anticipates a slow expansion in FY24, with new openings reduced from a target of 72 to just over 60, due to softening consumer sentiment.
Kenanga Research said QL Resources’ management indicated that its annual capital expenditure (capex) is within the RM200mil-RM300mil range with key focus on expanding its marine product division.
The group has earlier shared that it planned to spend RM40mil to increase its prawn aquaculture production capacity from the present 2,000 tonnes to 6,000 tonnes within the next four years and a RM50mil capital expenditure (capex) in building capacity for its new frozen surimi-based products in Surabaya.
It also plans to build a state-of-the-art surimi-based product plant in the next five years on a 200-acre land next to the existing plant in Hutan Melintang, Perak.
Kenanga Research has raised its FY24 to FY25 net profit forecasts by 0.5% and 1.8%, respectively, after factoring in higher contribution from its marine product division.
Besides, it lowered its capex assumption to RM265mil for FY24 and RM275mil for FY25 from RM320mil each previously.
The research house, which downgraded the stock to “market perform” from “outperform” previously, has raised the stock’s target price to RM6.25.
The risks to its call include the inability to pass on cost inflation, rough and aggressive monsoon seasons, changes in fishing regulations and the strengthening of the ringgit against the US dollar.
