Yee Lee FY14 profit seen to grow 8% to RM34m on Spritzer contribution, says Kenanga

by **Cals** Fri 09 May 2014, 20:16

Business & Markets 2014

Written by Jeffrey Tan of theedgemalaysia.com

Friday, 09 May 2014 10:53

KUALA LUMPUR (May 9): Yee Lee Corporation Bhd’s core net profit is expected to grow by 8% to RM34 million this year on the back of higher profit contribution from its associated company, Spritzer Bhd, according to Kenanga Research.

Consequently, the research house raised its FY15E core net profit forecast up 1% to RM37.8 million.

In a note today, Kenanga’s research analyst Alan Lim Seong Chun said he upgraded target price for Yee Lee to RM2.10 from RM2.06 and rated the stock a ‘trading buy’.

“We see good prospect for Yee Lee in FY14,” said Lim, noting the firm had recorded 21 years of profitability since its listing in 1993.

Touching on Yee Lee’s 1Q results, he said the firm’s core net profit came in above expectation, making up 27% of his estimate of RM33.7 million.

He added Spritzer’s profit contribution also came in higher than expected at RM2.3 million, comprising 37% of his forecast of RM6.2 million for FY14.

“We gather that Spritzer’s earnings has benefited from higher sales of bottled water coupled with a reduction in packaging material cost.

“We believe that the higher sale volume from Spritzer is due to the water rationing, which occur in the first quarter this year,” said Lim.

Lim believes Yee Lee is still undervalued, adding the discounts are not justified due to its growth prospect and strong profitability track record.