PETALING JAYA: Able Global Bhd
(AGB) can expect earnings to rise going forward, with higher demand for its food and beverage segment and lower costs.
Based on that, TA Research raised its earnings estimates by 7.3% and 6.5% for the company’s financial years 2024 (FY24) and FY25.
TA Research said after meeting with AGB’s management, the company provided guidance that sales volume and dairy production picked up in FY23, mainly led by higher demand from existing and new customers.
Most of the prices for the company’s raw materials – milk and palm oil – have returned to normal levels except for sugar.
Sugar had decreased quite significantly from its peak in the nine months of FY23.
Hence, the pre-tax profit margin of the company’s food and beverage segment in the fourth quarter of FY23 showed an improvement from 3.1% quarter-on-quarter to 14.2%.
The research house maintained its “buy” call on the stock with a revised target price of RM1.94 a share from RM1.75 previously, based on a sum-of-parts valuation.
It added that AGB has completed its maiden shipment of evaporated-milk products to the United States, Central America and South America in a diversification of its sales. The group is also planning to export its condensed milk products to the United States by FY24.
With growing demand from its existing and new customers, the research house expects the utilisation rate to reach approximately 40% for the company’s Mexico plant in FY24.
It stood at 25% in the fourth quarter of FY23 and approximately 20% for FY23.
AGB is also planning to seek approval to export full-cream dairy products from Mexico to the United States.
Currently, the group is engaging with the Mexico Health Authority to certify its plant and full-cream milk products, which is a prerequisite for health certification and export to the United States.
Overall, the research house is maintaining its expectations that the group will obtain export approval by the end of the second half of FY24.
The company also has acquired a parcel of land in in Kuala Langat, Selangor, totalling 297.5 acres, with 89.3 acres utilised for manufacturing, to expand manufacturing operations and property development.
The projected gross development value for the site stands at RM1.5bil, after excluding the 89.3 acres for manufacturing facilities. The group has submitted the necessary documents for land-use conversion, development order and factory layouts for the site to regulatory bodies and is awaiting approval.
Capital expenditure is expected to hover around RM80mil to RM100mil for the development in Kuala Langat and it will be funded via borrowings.
TA Research’s estimates that the company’s the net gearing in FY24 will remain healthy in the range of 0.4 times (from 0.3 times) after taking into consideration the bank borrowings.
