Teo Seng rises 3.3% on the back of rebound in egg prices

by **Cals** Fri 02 Oct 2015, 00:41

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[size=28]Teo Seng rises 3.3% on the back of rebound in egg prices

KUALA LUMPUR (Oct 1): Egg producer Teo Seng Capital Bhd ([You must be registered and logged in to see this image.] Valuation: 1.50, Fundamental: 1.90)'s shares rose 3.29% due to rising interest in the stock on the back of a rebound in egg prices.
At 10.53am, the stock rose 5 sen to RM1.57, with a total of 848,300 shares done.
After a 33.03% slump in share prices from a peak of RM2.21 in late March this year, the stock has risen steadily since early last month on the back of a rebound in egg prices, climbing 38.94% since Sept 2.
Teo Seng has been eyed as an attractive stock by Asia Analytica.
In its report on Sept 29, the research firm said the company's earnings are affected by fluctuating egg prices and costs for feed stock, mainly corn and soybean meal, which are denominated in US dollar.
It noted that the slump in Teo Seng's share price coincided with the sharp fall in egg prices — Grade "A" eggs slid to 29 cents from 37 cents — which pulled down the company's second quarter of financial year 2015 (2QFY15) results.
However, as egg prices are on the rebound, the company is expected to record a better performance in the second half of FY15, the research firm said.
Asia Analytica said Teo Seng has hedged about one year's supply of animal feed in 2QFY15, thus, the impact from recent weakening of ringgit will be minimal.
"It also exports about 27.75% of the revenue to Singapore and should benefit from the stronger Singapore dollar," the report stated.
The research firm also noted that the company is expanding capacity, which should underpin longer-term growth.
"Dividends, however, may be cut back this year, in view of the higher capital expenditure (capex)," it said, adding that Teo Seng has a dividend policy to pay out 20%–50% of annual net profits.
"We estimate dividends at roughly 5 sen per share — after taking into account the 1-for-2 bonus issue in January. That will earn shareholders a fairly decent yield of 3.52%," the research firm said.
(Note: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)
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