Kenanga Research: Power Root to double revenue to RM90m this year

Kenanga Research: Power Root to double revenue to RM90m this year
Business & Markets 2013
Written by Fatin Rasyiqah Mustaza of theedgemalaysia.com
Thursday, 14 March 2013 10:56


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KUALA LUMPUR (Mar 14): Kenanga Research is positive on Power Root’s long-term prospects and expects the groups export segment to double in revenue in its financial year 2013 to RM90 million from 46.2 million previously.

The research house also foresees the group’s financial year 14 revenue to increase to RM130 million through its plans of setting up a production facility in the UAE in late 2014, which is believed to further support growth in the Middle East and African markets through higher demands.

Within a seven month time-frame, Power Root had twice beaten Kenanga’s earnings projections, with a 116.7% year-on-year surge in its net profit to RM25.4 million in its most recent quarterly results.

“This was due to an increase in the local and export sales apart from the RM3.4 million one-off gains on disposal of PROPERTIES [],” said the research house.

According to Kenanga, Power Root has delivered a handsome total return of 68.8% since its first recommendation on the August 14, 2012 with a trading buy at RM0.90.

The research house also added that the share price had outperformed the benchmark on FBMKLCI significantly as the stock had ended almost unchanged over the same period of time (1,646.32 to 1,646.22).

Kenanga Research said it liked the company for its export growth prospects, expansion track into new markets, new product launches, which include the well received Ah Huat label and high scalability of its demand in both the domestic and export markets.

On its Take Profit rating on the stock with a fair value of RM1.48, the research house said Power Root’s share price was now trading at 12.3x PER, which valuation appears slightly stretched in our view.

“There is also an element of uncertainty ahead of the impending General Elections, and as such, we feel that it may be time to take some chips off the table at this level.

“That being said, we remain positive on Power Root’s longer-term prospects, and may revisit the stock should the share price retreat to a more reasonable level.

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