Maybank IB’s FY24E earnings estimates were lowered by 4% (FY25E-FY26E unchanged) on the back of temporary challenges to QL Resources Berhad’s CVS sales and softer surimi ASPs in the sequential quarters, but the house said resilient demand and added capacity will be the driving force behind QLG’s forward earnings growth outlook.
Positive outlook for MPM and ILF
The marine products manufacturing (MPM) segment’s medium-term outlook remains positive. Maybank IB understands that its new Surimi processing plant in Indonesia is undergoing trial runs at present, and will start to positively contribute to group earnings from FY25E onwards, with a timeline of 3-5 years to hit full capacity.
In the shorter-term however, Surimi ASPs may be suppressed due to lower fish catch and ongoing price pressure from heightened global competition.
Meanwhile, ILF margins should sustain with ongoing egg subsidies in Malaysia and eased feed raw material costs to buffer volatility in egg ASPs in Vietnam and Indonesia.
Slight negative impact to Family Mart sales
Family Mart’s new store opening plans of between 60-80 stores p.a. is intact (3QFY24: 385 stores). QLG aims to reach c.396 stores by end-FY24E and targets the Northern and East Coast regions for new store openings (targeting 600 stores by FY27).
Recent calls for boycotts have adversely impacted Family Mart’s sales by c.10%. Coupled with the Ramadan period, QLG’s CVS segmental sales could be weaker in 4QFY24.
Note that c.4% of Family Mart stores are located in the ‘Green States’ where the other retailers have experienced the brunt of boycotts.
Adjusting forward EPS and DPS estimates
Imputing for seasonally softer Surimi ASP and CVS sales, Maybank IB’s FY24E earnings estimates were lowered by 4% but FY25E-FY26E estimates are unchanged.
Based on QLG’s strong cashflow generation and stable capex requirements, Maybank IB does not discount the possibility of a higher dividend payout in FY24E (YTD: 3sen). Hence Maybank IB’s FY24E-FY26E DPS estimates are raised to 7sen p.a. (vs. 3.5sen p.a. previously).
QL Resources Bhd engages in the livestock farming, surimi manufacturing, and palm oil businesses.
