PETALING JAYA: CCK Consolidated Holdings Bhd is expected to see a boost in revenue following the acquisition of a new business in Indonesia for its prawn division as well as the opening of new stores.
According to MIDF Research, the prawn segment only accounted for 6.5% of total revenue in FY22.
Therefore, going forward, the additional revenue contribution from the newly acquired PT Bonanza Pramata Abadi in July 2022 is expected to drive growth for the group in the coming financial year.
As for its expansion plans, CCK plans to establish one more supermarket with a significantly large variety of products in East Malaysia within the next two years, as well as open two new CCK fresh mart outlets in FY23.
MIDF Research stated in a report that the payback period for opening one standard-size retail store is about six months.
CCK has said that all store locations have been chosen carefully to ensure profitability.
As for its poultry segment, CCK found the impact of price ceilings for chicken and eggs manageable, as the group has implemented effective cost-control measures and benefited from a favourable product mix and economies of scale due to its stake in Gold Coin Sarawak Sdn Bhd (GSC).
CCK holds a 27.2% stake in GCS.
MIDF Research noted that GCS purchases raw materials such as corn and soybean meals to be processed into animal feeds.
The normalisation of corn and soybean forward prices portends reduced future raw material costs, which will further drive down input costs, boosting CCK’s profit margin and encouraging ongoing chicken production to maintain a sufficient market supply.
MIDF Research said although there was a downtrend in prices for chicken and eggs in Sarawak on a monthly basis in May 2023, the average costs remained elevated compared to the previous year and 2021.
This is as historically, poultry prices in Sarawak have been higher than the national average in Malaysia.
CCK reported an increase in revenue to RM240mil and a net profit of RM16.2mil or an earnings per share of 2.60 sen for its first quarter of financial year 2023 (FY23).
MIDF Research said the growth in revenue was mainly driven by improvement in all business segments, particularly retail, a turnaround in the poultry division and the additional revenue contribution from PT Bonanza in the second half of FY22, bolstering the prawn business.
MIDF Research has a “non-rated” call on CCK with a fair value of 96 sen per share.