JF Apex Securities upgrades QL to Buy, raises target price to RM3.90

by **Cals** Thu 30 Oct 2014, 23:24

JF Apex Securities upgrades QL to Buy, raises target price to RM3.90

KUALA LUMPUR (Oct 30): JF Apex Securities Research has upgraded QL Resources Bhd ([You must be registered and logged in to see this image.] Financial Dashboard) to a Buy (from Hold) with a higher target price of RM3.90 (from RM3.30) and said it favours the stock for its unique and defensive business model where QL’s products were largely staple food-based products and demand for its product would stay resilient despite the lower consumer spending.
In a note Thursday, the research house said that QL was the good stock for investors who sought defensive and solid consumer play amid the current weak consumer sentiment, as the impact of softer consumer spending will be minimal on the group.
“We also view the recent general offer move would not divert the group’s attention as its regional expansion is well on track,” it said.
JF Apex Research said QL was expanding its core surimi (fish paste) and fishmeal business by adding production capacity of 7,500 mt per annum in FY15 in its Indonesian operations, as the group was looking to replicate its success of local MPM division into its Indonesian operations.
“Management is optimistic on the outlook for MPM division, underpinned by the improving surimi price and the strong demand for fishmeal in Malaysia and Indonesia,” it said.
The research house said the outlook for QL’s palm oil activities divison was clouded by the falling CPO prices.
“However, the increasing matured hectares of palm trees in Eastern Kalimantan to 8,000 ha in FY15 from 6,500 ha in FY14 would support fresh-fruit-bunches (FFB) production growth.
“Thus, we think that the higher FFB production growth would be able to mitigate the adverse impact of softening CPO prices,” it said.