Observers expect the group’s continuous expansion in Indonesia, solid market share and consistently strong margins at the marine product manufacturing segment to drive earnings growth.
MPM remains the group’s main earnings driver with major expansion completed in Indonesia and ongoing expansion at the Hutan Melintang plant.
More M&A’s in the MPM segment are expected in order for the group to gain market share and expand its regional operations particular in China.
The group’s integrated livestock segment’s PBT is also gradually improving as prices of soyabean and corn are declining, as the extended drought in the US eases (Dec 2013).
Signature: If its land sale go through, its net cash should rise to rm78 million or 65 sen per share. The proceeds would be more than sufficient to fund the construction of its new factory.
Its existing order is more than rm200 million.
Earnings growth over the next three years from 2014 should be very strong.
It is a leading resource based agriculture company with three main business segments in marine product manufacturing, palm oil and integrated livestock farming.
The group draws from its background in deep sea fishing and is now the largest producer in Asia of surmi based (fish meal) products, and fish and poultry feed. However the group’s largest source of revenue and profit is now ILF business, which generated almost 60% of revenue and more than half of its profit for FY2012.
Through its poultry operations under the ILF arm, the group supplies roughly 15% of the eggs consumed in Malaysia .
The group has taken a more regional focus, and one of its strengths is its ability to replicate its core businesses regionally.
It is expanding its MPM capacity with a plant in Surabaya , Indonesia , that will see it double its surmi capacity to 10000 tones per year by Sept 2013 and fishmeal to 10000 tones per year by March 2013.
It is also expanding its ILF business in Indonesia .
It has set aside rm200 million annual capex from 2013 to 2014 with 60% borrowed and the rest from internally generated funds. The group’s capex will go towards palm oil activities which contributed 8.5% to operating profit in Fy2012.
Most of the capex on palm oil activities will go into planting 2000ha to 25000ha per year of the group’s total 15000ha of plantation land in Indonesia for next few years from 2012. The group has 3000ha of matured oil palm plantaiton land in Sabah .
Palm oil related assets currently make up slightly over 22% of the group’s total assets
Its integrated livestock farming business is suffering from the high prices of raw materials such as maize and soybean which are the ingredients for the feed meal for chickens and chicks.
On top of that, the age profile of the group’s oil palm plantation in East Kalimantan Indonesia is still relatively young. It will take several more years for the age profile to mature to give QL good yield.
It is now growing from a high base after couple of years prior to FY2012.
QL has been very cautious in growing its businesses. It has set up a solid foundation for the businesses to grow. However most of the growth factors will only be recognized from FY2014 onwards.
Among the growth factors that will contribute to QL’s higher net profit growth in FY2014 is the maturing oil palm. QL has 15000ha of oil palm plantation in East Kalimantan but only 4000ha are considered mature at the moment.
By 2015, the contribution from oil palm plantation will stand at around 20% of QL’s top line provided QL’s integrated livestock and marine product manufacturing businesses continue to expand at their current pace in the next two to three years.
The group has invested some more than rm300 million in its farms and facilities in Vietnam and Indonesia .
Disclaimer:
Please note that all data given are merely blogger's opinion. It is strongly recommended that you do your own analysis and research before investing.
