Review

• Able Global Berhad’s (ABLEGLOB) 9MFY23 core earnings of RM32.3mn (+15.1% YoY) beat expectations, accounting for 100% and 94% of ours and consensus’ full-year estimates, respectively. It was largely driven by higher sales demand across the board amidst easing input cost environment.

• The group declared third single-tier interim dividend of 2.0sen/share (2QFY22: 1.0sen/share), bringing the YTD dividend to 4.5sen/share (1HFY22: 3.0sen/share)

• YoY, 9MFY23 revenue grew 13.5% YoY to RM479.2mn, contributed by higher sales in the F&B segment despite partly offset by the decline in tin cans manufacturing segment. We believe the improvement in F&B segment has achieved better economies of scale, leading to higher group’s EBIT of 37.1% YoY.

• QoQ, 3QFY23 topline leapt 13.1% QoQ to RM176.8mn, largely underpinned by improvement across the boards, namely the tin manufacturing segment (+34.1% QoQ) and F&B segment (9.1% QoQ). Consequently, its group’s EBIT experienced a substantial uptick of 40.8% to RM21.9mn amidst the ease of raw material costs, which evidently shown in higher GP margin of 18.5% (+3.9ppt QoQ).

Impact

• We tweak our earnings forecasts upward for FY23-25F by 27%/2.8%/2.6%, respectively, after factoring in the higher-than-expected 9MFY23’s results.

Outlook

• The company addressed its concern over the challenging business landscape in tin manufacturing industry. Despite the steel cost has mostly stabilised and normalized to pre-pandemic level, which provide incentives to stimulate the demand in near term, we are wary as the downstream producer’s preference might continue shifting to soft packaging for cost efficiency and carrier friendly.

• On the flipside, we are cautiously optimistic on the F&B segment due to the potential risk of cost surging as a result of dairy production setback in Australia stemming from weather condition. That said, as the input costs have normalised (namely the skim milk powder and whole milk powder) and margin is well preserved, the profitability should be sustainable throughout the year.

Valuation

• Upgrade to Buy on ABLEGLOB with a higher TP to RM1.55/share (previously RM1.50/share) based on SOP valuation method.

Source: TA Research - 30 Nov 2023