Maybank IB Research the new plant will start to positively contribute to group earnings from financial year 2025 onwards.
KUALA LUMPUR: With its new surimi processing plant in Indonesia opening soon, the outlook for QL Resources Bhd
’s marine products manufacturing business segment remains positive in the medium term, says Maybank IB Research.
According to the research firm, the new plant will start to positively contribute to group earnings from financial year 2025 (FY25) onwards, with a timeline of three to five years to hit its full capacity. “In the shorter-term, however, surimi average selling prices (ASPs) may be suppressed due to lower fish catch and ongoing price pressure from heightened global competition,”Meanwhile, for its integrated livestock and feed meal business segment, the research house noted that margins should be able to sustain from ongoing egg subsidies in Malaysia and eased feedstock raw material costs to buffer volatility for egg ASPs in Vietnam and Indonesia.
As for its Family Mart convenience stores, Maybank IB Research said new store opening plans appear to be intact.
The group plans to open between 60 to 80 stores per annum. As of the third quarter of FY24 (3Q24) it had 385 Family Mart stores.
“QL aims to reach circa 396 stores by end-FY24 and targets the Northern and East Coast regions for new store openings and is targeting 600 stores by FY27,” said the research firm.
However, QL’s convenience store segmental sales could be weaker in 4Q24 due to a slight negative impact from recent calls to boycott a particular convenience chain store, coupled with the Ramadan period.
“Our FY24 earnings estimates are lowered by 4% on the back of temporary challenges to its convenience store sales and softer surimi ASPs in the sequential quarters, but resilient demand and added capacity will be the driving force behind QL’s forward earnings growth outlook.”
Maybank IB Research said there could also be better dividends in store given QL’s strong cash flow generation and stable capital expenditure requirements.
“Hence our FY24 to FY26 dividend per share estimates are raised to seven sen per year (versus 3.5 sen previously).”
The research house had maintained its “buy” call on QL with an unchanged target price of RM6.80, derived from the discounted cash flow model with weighted average cost of capital at 7%.
QL’s net profit in its recently reported third quarter ended Dec 31, 2023 rose year-on-year (y-o-y) by 27.2% to RM123.62mil. This is on the back of revenues for the said quarter rising y-o-y by some 5.1% to RM1.71bil. The company said in its financial statements that Family Mart’s last reported quarter sales had increased by 30% from the corresponding quarter, mainly due to an increase of 42 stores and additional mini-marts during the period.
