Stock Name: KAWAN
Company Name: KAWAN FOOD BHD
Research House: KENANGA
Kawan Food Bhd
(Aug 25, RM1.34)
Maintain buy at RM1.40 with target price of RM1.60: Kawan Food's (KFB) 1HFY2010 net profit of RM6.5 million came in within market consensus but slightly below our expectations, constituting 43.6% of our FY10 estimate of RM14.9 million and 54.16% of consensus forecast of RM12 million.
Year-on-year, 1HFY2010 net profit has declined by 1.8% due to the depreciation of the US dollar, though this is being offset by the slight improvement in revenue growth of 1.1%, supported by strong sales growth in the domestic market (14.2%), Europe (5.5%) and North America (6.1%), while Asia (excluding Malaysia) registered a decline of 4.7% and Oceania a 9.7% lower revenue.
Quarter-on-quarter, KFB registered a lower turnover by 1.3% while profit before tax declined to RM4.15 million due to lower sales and weaker demand generated in 2QFY10. The improvement in economy and the increase in purchasing power do not fare well for KFB, as consumers in developed countries opt to dine out. Consequently, Ebit margin declined to 18.1% from 19.3% and we believe this is due to the higher costs of raw materials.
Earnings estimate for FY10 and FY11 remain unchanged. We anticipate stronger 2HFY2010 earnings as new capacity from the Nantong, China and new Shah Alam plants comes on-stream, in addition to festive seasons to stimulate demand.
Maintain buy recommendation with target price of RM1.60 based on the same 13 times PER applied to revised FY10 EPS of 12.4 sen. We believe that the Nantong and new Shah Alam plants could become earnings contributor sooner than initially expected (FY11) due to the ready demand from KFB's existing export markets. KFB's existing Shah Alam plant is already running close to full capacity. ' Kenanga IB Research, Aug 25
This article appeared in The Edge Financial Daily, August 26 2010.
Company Name: KAWAN FOOD BHD
Research House: KENANGA
Kawan Food Bhd
(Aug 25, RM1.34)
Maintain buy at RM1.40 with target price of RM1.60: Kawan Food's (KFB) 1HFY2010 net profit of RM6.5 million came in within market consensus but slightly below our expectations, constituting 43.6% of our FY10 estimate of RM14.9 million and 54.16% of consensus forecast of RM12 million.
Year-on-year, 1HFY2010 net profit has declined by 1.8% due to the depreciation of the US dollar, though this is being offset by the slight improvement in revenue growth of 1.1%, supported by strong sales growth in the domestic market (14.2%), Europe (5.5%) and North America (6.1%), while Asia (excluding Malaysia) registered a decline of 4.7% and Oceania a 9.7% lower revenue.
Quarter-on-quarter, KFB registered a lower turnover by 1.3% while profit before tax declined to RM4.15 million due to lower sales and weaker demand generated in 2QFY10. The improvement in economy and the increase in purchasing power do not fare well for KFB, as consumers in developed countries opt to dine out. Consequently, Ebit margin declined to 18.1% from 19.3% and we believe this is due to the higher costs of raw materials.
Earnings estimate for FY10 and FY11 remain unchanged. We anticipate stronger 2HFY2010 earnings as new capacity from the Nantong, China and new Shah Alam plants comes on-stream, in addition to festive seasons to stimulate demand.
Maintain buy recommendation with target price of RM1.60 based on the same 13 times PER applied to revised FY10 EPS of 12.4 sen. We believe that the Nantong and new Shah Alam plants could become earnings contributor sooner than initially expected (FY11) due to the ready demand from KFB's existing export markets. KFB's existing Shah Alam plant is already running close to full capacity. ' Kenanga IB Research, Aug 25
This article appeared in The Edge Financial Daily, August 26 2010.
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