TA Research believes that the profitability of QL Resources’ ILF segment should improve further when the government lifts the price ceiling for eggs after June 2023.
PETALING JAYA: QL Resources Bhd
is expected to register steady earnings going forward, driven by its diversified revenue base and the anticipated solid performances from its marine product manufacturing (MPM) and integrated livestock farming (ILF) divisions.
With the exception of its palm oil and clean energy (Poce) segment, Hong Leong Investment Bank (HLIB) Research said it is encouraged by the company’s other divisions.
“The MPM division benefitted from better selling prices, in addition to normalised fishing activities that were impacted from the lockdowns and restrictions in its financial year ended March 31, 2022 (FY22).
“Note that the MPM segment has historically been the earnings driver with the sales of its frozen food products, which contributes about 60% to 63% of pre-tax profit.”
The research house added that the company’s ILF segment has been benefitting from higher selling prices and volume for feed raw material trading, as well as improved farm produce selling prices.
Additionally, HLIB Research said QL Resources’ overseas convenience store (CVS) division had seen modest earnings improvement in FY23, due to the increase in the number of stores despite the reduction in average store sales.
“Management remains cautiously optimistic that the group’s business performance will remain resilient for FY24 with the recovery momentum from the past few quarters and its continued focus in driving operational efficiency.”
TA Research meanwhile believes the profitability of QL Resources’ ILF segment should improve further when the government lifts the price ceiling for eggs after June 2023.
It added that the division’s performance over the near-term will also be supported by government subsidies.
“Based on our channel checks, price-controlled eggs have been trading at ceiling prices since a few months ago.
“The CVS segment’s margin compression is expected to continue due to elevated operating expenses (labour and electricity costs) and dampened consumer spending from higher borrowing costs and inflation.”
The research house believes that the company’s Poce division is expected to improve further with improvement in Boilermech Holdings Bhd’s sales and margin.
Boilermech is the largest and leading biomass and industrial boiler engineering company in Asean.
In the fourth quarter ended March 31, QL Resources posted a net profit of RM73.3mil, up 5.6% from RM69.4mil a year prior.
Revenue for the period expanded to RM1.47bil versus RM1.36bil previously while earnings per share rose to 3.01 sen against 2.85 sen last year.
For FY23, the group posted a net profit of RM346.8mil, up 60% from RM217.3mil while revenue jumped 19.6% to RM6.26bil against RM5.24bil a year prior.
MIDF Research said QL Resources’ FY23 earnings came in below expectations.
“Given that results were slightly lower than expected, we tweak our earnings estimation for FY24 (minus 3.3%) and FY25 (minus 1%) after accounting for increased CVS division input costs,” it said.
