Kenanga raises QL target price on steady earnings growth

by **Cals** Mon 25 Aug 2014, 03:20

Business & Markets 2014

Written by Jeffrey Tan of theedgemalaysia.com

Friday, 22 August 2014 12:17

KUALA LUMPUR (Aug 22): Kenanga Research has raised its target price for QL Resources Bhd to RM3.71 from RM3.51, to reflect the stead earnings growth in the agro-food company.

QL shares are trading at RM3.45, up five sen or 1.5% at 11.45am today.

Yesterday, QL reported its net profit grew 15.4% to RM40.36 million in the first quarter ended June 30, 2014, on the back of higher revenue of RM653.6 million.

In a note today, Kenanga Research said it maintained an ‘outperform’ call for QL, deemed the net profit as within expectation, accounting for 20.6% and 20.9% of full-year forecast and consensus’ estimates respectively.

Analyst Soong Wei Siang of Kenanga said he expects stronger numbers in subsequent quarters, on the back of recovery in regional farm produce prices as well as better fishmeal prices.

“We expect QL’s marine product manufacturing segment to contribute 49.2% and 50.9% to the group’s profit before tax in FY15 and FY16 respectively,” he said, noting the group had expanded its surimi-based production capacity last year.

Soong said, moving forward, the group’s earnings are expected to be exposed more towards crude palm oil (CPO) prices.

He pointed out QL’s fresh fruit bunches production is projected to grow by at least 20% in FY16, due to its matured young tree age profile of four to seven years old.

But Soong trims his FY15E and FY16E net profit forecasts by 0.4% and 3.1% respectively, in light of the new CPO price assumption of RM2,500 per metric tonne.