QL (7084) : RHB Research upgrades QL Resources to Buy, higher TP
KUALA LUMPUR: RHB Research has upgraded QL Resources to Buy from Neutral with a higher target price of RM3.90 pegged to a new target price per earnings (P/E) of 22 times CY15 EPS, which is within the range of its five-year historical trading band.
In a note on Friday, the research house said it ascribed a higher P/E target due to its resilient growth, with estimated two-year earnings CAGR of 22.6%.
QL has solid fundamentals and a unique defensive business model, it said.
It said QL continues to see strong demand for fishmeal in Malaysia and Indonesia, while sales for surimi and surimi-based products are also improving.
In view of this, QL is adding new production capacity to its Surabaya plant. To enhance its product offering, QL is also constructing a new snack food factory at its Hutan Melintang plant, which is targeted for commencement by early 2015.
QL also expects its new venture of shrimp farming in Kudat, Sabah to start contributing in the coming quarters, with shrimp prices remaining strong.
It added that to capitalise on the increasing egg consumption pattern in the region, QL is looking to expand its livestock farming operations in Indonesia and Vietnam. QL is also currently constructing its new feedmill in Indonesia, as this would help to mitigate further margin erosion that would come from the volatile feed cost.
However, RHB noted that QL remains cautious on the outlook for its palm oil activities, as unfavourable CPO prices would affect its plantation results.
In addition, increasing competition for FFB supplies will likely also affect its CPO mill margins. However, improved tree maturity profile could potentially support the FFB production growth in FY15, mitigating the adverse impact from the softening of CPO prices, it said. - The Star
KUALA LUMPUR: RHB Research has upgraded QL Resources to Buy from Neutral with a higher target price of RM3.90 pegged to a new target price per earnings (P/E) of 22 times CY15 EPS, which is within the range of its five-year historical trading band.
In a note on Friday, the research house said it ascribed a higher P/E target due to its resilient growth, with estimated two-year earnings CAGR of 22.6%.
QL has solid fundamentals and a unique defensive business model, it said.
It said QL continues to see strong demand for fishmeal in Malaysia and Indonesia, while sales for surimi and surimi-based products are also improving.
In view of this, QL is adding new production capacity to its Surabaya plant. To enhance its product offering, QL is also constructing a new snack food factory at its Hutan Melintang plant, which is targeted for commencement by early 2015.
QL also expects its new venture of shrimp farming in Kudat, Sabah to start contributing in the coming quarters, with shrimp prices remaining strong.
It added that to capitalise on the increasing egg consumption pattern in the region, QL is looking to expand its livestock farming operations in Indonesia and Vietnam. QL is also currently constructing its new feedmill in Indonesia, as this would help to mitigate further margin erosion that would come from the volatile feed cost.
However, RHB noted that QL remains cautious on the outlook for its palm oil activities, as unfavourable CPO prices would affect its plantation results.
In addition, increasing competition for FFB supplies will likely also affect its CPO mill margins. However, improved tree maturity profile could potentially support the FFB production growth in FY15, mitigating the adverse impact from the softening of CPO prices, it said. - The Star
