KUALA LUMPUR: Kenanga Research is bullish over Leong Hup International Bhd
‘s (LHI) earnings prospects following an estimate-beating performance in the the first quarter of the year.
The research house said it is optimistic the group will maintain its strong earnings streak based on strong and stable broiler and day-old chick prices, a local table egg price recovery in the second half of the year and solid contribution from The Baker’s Cottage.
“We believe that LHI will have a solid 2QFY21 despite MCO 3.0, given the seasonal effects of cold weather and festive seasons driving up poultry average selling price (ASP).
“Additionally, we reckon that the rising popularity of delivery and take-away will continue to hold HoReCa demand, preventing it from falling to levels of previous lockdown periods,” it said in a note.
However, Kenanga said there is downward pressure from the rising Covid-19 cases in Malaysia, Vietnam and the Philippines while feed mill income is likely to normalise following supranormal margins in the past quarters.
The research house raised FY21 estimates by 5% while maintaining its FY22 and FY23 forecasts.
“We maintain our BUY call on Leong Hup International with an unchanged fair value (FV) of RM1.02/share based on a PER of 17x FY 22F EPS,” it said.
In 1QFY21 LHI posted its best-ever quarterly net profit of RM703.mil, which came to 35% and 40.8% of Kenanga’s and consensus full-year estimates.
Revenue growth rose 17% year-on-year while Ebitda surged 14.6x due to improved average selling prices of broilers an dday-old-chicks in Indonesia, the Philippines and Malaysia.
by 
