Poultry players buoyed by improved profitability

PETALING JAYA: Robust 2023 earnings have been pushing poultry-related stocks – with some counters having experienced a “mini bull run” on Bursa Malaysia especially since the beginning of the year.

Lay Hong Bhd’s share price, which was 30% higher since mid-February, closed at 39 sen last Friday while Teo Seng Capital Bhd had soared 44% year-to-date (y-t-d) to RM2.30 on Feb 20 before paring its gains in the last three weeks to close at RM1.91 last Friday.

Another industry player that saw y-t-d price appreciation was QL Resources Bhd which ended the trading week at RM5.93 a share, making a gain of some 19 sen from Feb 14.

LTKM Bhd also saw its stock price surge to a year-high RM1.63 on March 7 from RM1.28 on Feb 13, before retreating back to RM1.40 last Friday.

Other poultry product producers like Leong Hup International Bhd and CAB Cakaran Corp Bhd have also gained but seen some profit taking.

Experts who have kept a close eye on the sector said the strong showing in share prices was particularly by egg producers, who on top of robust financial results for 2023, were also buoyed by the maintenance of subsidies and price ceilings for eggs.

Chief investment officer at Tradeview Capital Nixon Wong opined the recent run up in share prices of the poultry stocks, particularly those that focus on eggs production, were driven by their improved profitability, which in turn was influenced by several factors.

“Firstly, the recognition of subsidies for eggs, combined with elevated egg prices, contributed significantly.

“Additionally, Teo Seng benefited from its higher production capacity for eggs, resulting in increased sales, amid persistent shortages during festive seasons and healthy egg consumption,” he told StarBiz.

Furthermore, he said favourable feed costs have also expanded margins, coupled with export sales to Singapore that have positively impacted business performance, especially considering the weaker value of the ringgit.

On the outlook for the industry, Wong said the poultry sector is cyclical in nature, and its performance ultimately depends on feed cost pricing as well as demand and supply conditions.

He predicted that while the share prices of respective players may experience a temporary pause due to the perception that subsidies are transient, all eyes will be on the timing of lifting the egg price ceiling.

“Once this price ceiling is lifted, players will be incentivised to increase production in response to high egg demand, ultimately leading to an increase in sales volume.

“However, the overall outcome hinges on the prevailing egg demand and supply conditions, which will determine the respective poultry company’s business performance and stock price,” said Wong.

Similarly, Rakuten Trade head of equity sales Vincent Lau opined the lifting of subsidies and price controls for chickens late last year had also played its part in the y-t-d price elevation of counters such as CAB Cakaran and CCK Consolidated Holdings Bhd.

From 71 sen on Jan 2, CAB Cakaran had seen its stock touch 82 sen on Feb 27, settling back on 74 sen at the end of last week while CCK Consolidated had jumped from 82 sen on Jan 2 to RM1.02 last Friday.

Lau expected the share price uptrend continuing, led by the decrease in feed costs as well as exports overseas.

“The outlook is fine, and we see these companies recording better performances as the year progresses,” he added.

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