Continued strong performance seen for Leong Hup


TA Research, in a note, pointed out that the government subsidy for farm chicken and eggs would ease LHI’s burden of high input cost of feed as well as relief consumers from high food inflation.

KUALA LUMPUR: Brokerage firms are positive that Leong Hup International Bhd (LHI) will continue to record strong financial performance with the further easing of movement restrictions.

This is likely to be driven by continuous volume expansion, value chain integration and vigilant cost control.

It is worth noting that the group returned to the black in the fourth quarter ended Dec 31, 2021 (Q4’21), posting a net profit of RM38mil compared with a net loss of RM53.4mil in Q3’21.

The improved results during the quarter under review was bolstered by its livestock segment which saw an improvement in average selling price of poultry products across key operating markets which allowed for better past-through of input cost of feed.

TA Research, in a note, pointed out that the government subsidy for farm chicken and eggs would ease LHI’s burden of high input cost of feed as well as relief consumers from high food inflation.

To recap, the government has subsidised 60 sen per kg of farm chicken and five sen per egg throughout the implementation of Keluarga Malaysia maximum price control scheme from Feb 5 to June 4.

The estimated amount of subsidy to be distributed to Malaysian farmers throughout the period is around RM500mil.

Additionally, the group’s retail arm, The Baker’s Cottage, will be rolling out new stores in 2022 and the group is focused on raising average store sales by monetising its brand and popularity alongside the introduction of more offerings to satisfy customers’ demands.

TA Research is keeping a “buy” call on the counter with unchanged target price of 91 sen per share based on 16 times FY23 earnings.

In the long run, AmInvestment Bank Research said LHI’s earnings recovery remained intact on the back of returning demand from hotels, restaurants and cafes as the economy reopens. “The expansion of its downstream business-to-consumer channel to other operating countries beyond Malaysia could re-rate LHI’s earnings further,” it added.

After accounting for the higher raw material costs assumptions, AmInvestment Bank revised LHI’s earnings estimates downwards by 27% and 11% for FY22 and FY23, respectively.

Meanwhile, Hong Leong Investment Bank has also trimmed LHI’s core net profits by 19% and 15.2% for FY22 and FY23 respectively due to higher feed cost assumptions.

Post downward earnings forecast revision and roll-forward of its valuation base year, the brokerage lowered its target price on LHI by 1.5% to 66 sen, based on 18 times revised FY22 core earnings per share of 3.7 sen.

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 1
Cxense type: free
User access status: 3
Subscribe now to our Premium Plan for an ad-free and unlimited reading experience!

Leong Hup , eggs , chicken , Baker's Cottage , retail ,

   

Next In Business News

Leong Hup shares remain unchanged amid price-fixing allegations
Ringgit opens lower against US$ as investors seek out safe haven
Net foreign inflow to Bursa Malaysia leaps to RM388.2mil
Investors strike a cautious note ahead of US inflation data
Trading ideas: IOI, SLP Resources, Hong Seng Consolidated, D'nonce Technology, Caely and ILB
Gold still a safe-haven asset
‘Snoozefest’ no longer: Volatility seizes Europe’s bond market
CAB boosting chicken and seafood businesses
Pantai Hospital Penang plans expansion
Strong growth seen for Agmo on mobile, web segment

Others Also Read