Kenanga maintains underperform on QL, TP of RM5.70


KUALA LUMPUR: Improvements in QL Resources Bhd 's marine, livestock and convenience store chain businesses could translate into long-term profitability for the group, said Kenanga research.

QL had yesterday announced 9M19 revenue of RM2.72bil due to higher catch rates from the marine products manufaucturing (MPM) segment and growth in output and sales from integrated livestock farming (ILF).

Pre-tax profit grew 9% year-on-year (y-o-y) thanks to stronger results from the two divisions. 9M19 PATAMI registered 11% higher y-o-y to RM173.5mil after incurring lower effective taxes of 14.5%.

In a research note, Kenanga maintained its underperform rating and target price of RM5.70 on QL. The stock last traded on Feb 28 at RM6.90 a share.

"We believe the rich valuation is reflective of a higher investor appetite, attributed to the stock’s defensive quality in the consumer staples space," it said. 

Post results,Kenanga left its FY19E/FY20E estimates unchanged.

The research house said the continued growth in the MPM is welcomed following highly unfavourable weather conditions that impacted catch rates

It added that further gains could come from the surimi plant and fleet expansion.

Meanwhile, the ILF segment has demonstrated strong growth potential from its bases in Vietnam and Indonesia while the group's feed million production could provide some buffer against commodity fluctuations.

As for Familymart, the convenience store chain is expected to generate profits by FY20 when it achieves it optimal store base of 120 locations, it said.

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