Stock Name: QL
Company Name: QL RESOURCES BHD
Research House: MAYBANK
QL Resources Bhd
(May 25, RM3.65)
Maintain buy at RM3.72 with unchanged target price of RM4.56: FY10 is QL's ninth straight year of double-digit net profit growth since its listing in FY2000, with more of the same to come in the next five years. Earnings came in very close to our FY10 forecasts. Maintain buy with an unchanged discounted cash flow-based (DCF) target price of RM4.56. QL remains our top consumer stock pick.
It was another record-breaking year for QL as it chalked up 4QFY10 net profit of RM26 million (+40.3% year-on-year; -15.8% quarter-on-quarter). Although 4Q earnings from the marine division was seasonally low, QL's continuous investment in cold rooms has helped ease scarcity of raw materials and helped raise marine's pre-tax profit margin by 5.6 percentage points y-o-y to 14%, leading to a 4Q pre-tax profit of RM13 million (+102.6% y-o-y; -19.1% q-o-q).
QL's FY10 net profit was better than the market's but within our expectations. Its RM106.4 million FY10 net profit (+19.2% y-o-y) was slightly higher than market consensus. Key contributors to earnings remain the farming and marine divisions contributing 53.3% and 40.8% respectively to QL's FY10 total pre-tax profit, by growing 34.5% and 23.4% y-o-y.
A final gross dividend of 7.5 sen per share or RM29.6 million was proposed, which is 28.6% more than the seven sen per share paid in FY09 as a 1-for-5 bonus issue was completed in FY10. Unlike stocks that trumpet paper profits but deliver little tangible returns, QL's net dividends paid out to shareholders have grown by nearly 10 times since its maiden net dividends of RM3.5 million in FY01.
Our RM4.56 target price assumes discounted free cash flows stagnating around FY11's levels although Ebitda (earnings before interest, tax, depreciation and amortisation) and net profit growth over the last decade have averaged at least 10% annually.
As is usual, we are highly encouraged that QL's earnings visibility over the five years will remain high as various domestic and overseas expansion plans progress. ' Maybank IB Research, May 25
This article appeared in The Edge Financial Daily, May 26, 2010.
Company Name: QL RESOURCES BHD
Research House: MAYBANK
QL Resources Bhd
(May 25, RM3.65)
Maintain buy at RM3.72 with unchanged target price of RM4.56: FY10 is QL's ninth straight year of double-digit net profit growth since its listing in FY2000, with more of the same to come in the next five years. Earnings came in very close to our FY10 forecasts. Maintain buy with an unchanged discounted cash flow-based (DCF) target price of RM4.56. QL remains our top consumer stock pick.
It was another record-breaking year for QL as it chalked up 4QFY10 net profit of RM26 million (+40.3% year-on-year; -15.8% quarter-on-quarter). Although 4Q earnings from the marine division was seasonally low, QL's continuous investment in cold rooms has helped ease scarcity of raw materials and helped raise marine's pre-tax profit margin by 5.6 percentage points y-o-y to 14%, leading to a 4Q pre-tax profit of RM13 million (+102.6% y-o-y; -19.1% q-o-q).
QL's FY10 net profit was better than the market's but within our expectations. Its RM106.4 million FY10 net profit (+19.2% y-o-y) was slightly higher than market consensus. Key contributors to earnings remain the farming and marine divisions contributing 53.3% and 40.8% respectively to QL's FY10 total pre-tax profit, by growing 34.5% and 23.4% y-o-y.
A final gross dividend of 7.5 sen per share or RM29.6 million was proposed, which is 28.6% more than the seven sen per share paid in FY09 as a 1-for-5 bonus issue was completed in FY10. Unlike stocks that trumpet paper profits but deliver little tangible returns, QL's net dividends paid out to shareholders have grown by nearly 10 times since its maiden net dividends of RM3.5 million in FY01.
Our RM4.56 target price assumes discounted free cash flows stagnating around FY11's levels although Ebitda (earnings before interest, tax, depreciation and amortisation) and net profit growth over the last decade have averaged at least 10% annually.
As is usual, we are highly encouraged that QL's earnings visibility over the five years will remain high as various domestic and overseas expansion plans progress. ' Maybank IB Research, May 25
This article appeared in The Edge Financial Daily, May 26, 2010.
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