QL’s FY19 earnings were in line with expectations, accounting for 96.3% and 95% of our and consensus estimates respectively. For the current quarter under review, QL recorded revenue of RM898m (+15% YoY) and net profit of RM43.2m (+11% YoY) mainly due to the better performance in Marine Product Manufacturing (MPM) and Integrated Livestock Farming (ILF) segment. The Palm Oil Activities (POA) continues to drag QL’s performance due to a lower CPO price as compared to the previous corresponding quarter. Growth drivers moving forward include the increase in capacity from the new chilled surimi-based production plant and better contribution from the Family Mart business. The latest store count for Family Mart is at 101 across Klang Valley and Johor. We maintain our earnings estimates and our Neutral call on QL. Our DCF-based target price remains unchanged at RM6.61.

• Marine Products Manufacturing (MPM). 4QFY19 revenue and PBT recorded double digit growth at 18% and 45% respectively as compared to 4QFY18. The growth was mainly attributable by the higher contribution from surimi-based products and the recovery of low fish catch cycle in Malaysia water. Meanwhile, PBT margin improved to 12.9% as compared to 10.5% in 4QFY18.

• Integrated Livestock Farming (ILF). 4QFY19 revenue increased by 18% due to the better contribution from Penninsular and Indonesia poultry units. However, PBT decreased by 11.6% as it was affected by the lower contribution from feed raw material trade and Vietnam poultry unit.

• Palm Oil Activities (POA) 4QFY19 revenue declined 13.4% YoY due to the lower CPO price (4QFY19: RM1,976 vs 4QFY18: RM2,462). Despite the drop in revenue, PBT increased significantly (4QFY19: RM10.5m vs 4QFY18: RM2.6m) due to higher contribution from associate coupled with better OER and CPO milling margins. Full year revenue and PBT decreased by 21.7% and 1.6% YoY dragged by a lower average CPO price and in 1HFY19, lower Fresh Fruit Bunches (FFB) processed in Indonesia operation caused by poor production.

Source: PublicInvest Research - 31 May 2019