23 April 2012
QL Resources- Regional expansion of poultry farms and oil palm plantations (Indonesia and Vietnam) expected to provide significant contribution by FY13 onwards, target price RM 3.43 - BIMB Securities Research
(QL opening stock price on 24.4.2012 was RM3.16)
Maintain neutral at RM3.16 with target price of RM3.43: QL is the biggest producer of surimi, surimi-based products and fishmeal in Malaysia, with a 50% market share in the surimi segment and 30% each in surimi-based products and fishmeal. Leveraging its success and experience in Malaysia, QL is replicating its business model in Indonesia with production capacity of 5,000 tonnes of surimi and fishmeal per year each. With capital expenditure of US$10 million (RM30.7 million), QL is planning to boost its operations by increasing its surimi and fishmeal production lines to 10,000 tonnes per year each. These are expected to commence operations by Dec 2012.
QL is one the rare few that have not been affected by global economic vagaries. Over the years, its earnings growth went on uninterrupted despite the Asian financial crisis of the 1990s, the severe acute respiratory syndrome (SARS) outbreak of the early 2000s and the subprime mortgage crisis of 2008. Apart from marine products manufacturing, a key earnings growth catalyst will come from its palm oil activities division when the 20,000ha Indonesian plantation reaches maturity. It is expected to deliver a positive contribution in FY13 and beyond. The same goes for its poultry farming in Indonesia and Vietnam, where contributions are expected to come onstream by FY13.
Following our recent meeting with the management, we are convinced that QL’s long-term prospects remain intact and look promising. For now, we ascribe a target price of RM3.43 by applying a CY12 earnings per share over its price-earnings ratio of 19 times which is +1 standard deviation of its past three-year PER valuation, justified by its solid fundamentals, and the expectation that regional expansion of both of its poultry farms (Indonesia and Vietnam) and oil palm plantations (Indonesia) will provide significant contribution by FY13 onwards. — BIMB Securities Research, April 19