Kenanga Research raises Zhulian target price after 9M13 profit beat expectations

by **Cals** Thu 17 Oct 2013, 13:27

Business & Markets 2013

Written by Jeffrey Tan of theedgemalaysia.com

Thursday, 17 October 2013 12:54
KUALA LUMPUR (Oct 17): Kenanga IB Research maintained its Outperform rating on Zhulian Corporation Bhd and raised its target price (TP) to RM4.60 from RM4.30 previously and said Zhulian’s 9MFY13 net profit of RM107.4 million was above expectations.
In a note today, the research house said the net profit came in above expectations, which accounted for 82.6% and 80.5% of house and consensus FY13 forecast.
The Kenanga research team said it revised its FY13 and FY14 net profit estimates by +5.6% and +5.5% to RM137 million and RM157.4 million respectively.
This is after assuming a lower operating cost and a higher net profit margin in the Thailand associate to 17% from 16% previously, it said.
“We maintain ‘outperform’ on Zhulian at RM4.01 and revise TP to RM4.60 based on an unchanged price earnings ratio PER of 13.4 times over a higher FY14E earnings per share of 34.2 sen,” said Kenanga.
“Our applied forward PER is reasonable, as it is still at a 26% discount to Amway (M) Holdings Bhd’s 18 times FY14 targeted PER considering their similar market capitalisation level.”
The research team said it remained positive on the multi level marketing (MLM) firm and believed its FY13-FY14 estimates are achievable.
“We are optimistic as a higher cost inflationary pressure environment may encourage more involvement by the low-middle income group within MLM activities, in search of higher return on spending as well as additional side-income,” said Kenanga.
In addition, the research house said Zhulian’s expansion plan to the Myanmar market at year-end and early next year will be a re-rating catalyst for the firm.