PETALING JAYA: Teo Seng Capital Bhd
’s earnings will be spurred by capacity expansion and product range extension for its layer farming segment, as well as steady contribution from its animal health products distribution division.
This will see its financial year 2024 (FY24) to FY25 core net profit rising further by 3.7% and 4.4%, respectively, to RM62.8mil and RM65.5mil.
Its stellar financial performance in the first quarter of 2023 is likely to be sustained into the remaining quarters of FY23. This will be led by higher egg production volume and government subsidies for eggs, said Hong Leong Investment Bank (HLIB) Research.
Teo Seng’s net debt and net gearing stood at RM108.7mil and 0.31 times as at March 2023. Its balance sheet is expected to remain healthy over the medium term, given its decent earnings prospects, said HLIB Research.
Though HLIB Research has not rated the stock, it said it had derived a fair value of RM1.31 a share for the counter based on a six times projected FY24 core earnings per share of 21.8 sen.
It said the price of table eggs, which account for 60% to 70% of Teo Seng’s total egg production volume, will likely remain at elevated levels even if the government decides to float the price.
The research house believes consolidation within the layer farming industry will continue over the longer term, resulting in less volatile egg prices.
Capacity expansion and broadening of its product range is expected to drive earnings further. This is anticipated to lead to a 12.5% increase in egg production capacity from FY24 and expansion of product range.
It will also venture further into downstream products such as producing boiled eggs and processing of old hens, which fetches superior and stable margins. It has good demand prospects for its animal health products, said HLIB Research.
