Stock Name: QL
Company Name: QL RESOURCES BHD
Research House: ECMLIBRA
QL Resources Bhd
(Dec 14, RM5.69)
Initiate coverage with a buy call at RM5.60 and target price of RM7.30: We initiate our coverage of QL Resources with a 'buy' recommendation and target price of RM7.30 based on 20 times CY11 PER. QL's products will benefit directly from rising global demand and price trends for food commodities. The group is one of Asia's largest surimi manufacturers and a Malaysian market leader in livestock feed trading, fish meal and egg production.
We have forecast a three-year forward forecast EPS CAGR of 17.3% (FY11/13), that will be driven by strong demand for QL's marine, livestock feed, poultry products and palm oil, with rising population and disposable income, as well as the group's steady capacity expansion. Diversification reduces earnings volatility by smoothing out the cyclical nature of its resource-based activities.
QL's expansion plan is both local and regional, with total group capex set to increase by 60% in the next two years to RM200 million annually. The group is replicating its business model in the Asean region with: (i) new poultry farms in Tay Ninh, Vietnam, and Cianjur, Indonesia; (ii) a new marine plant being constructed in Surabaya; and (iii) further planting and palm oil mill slated for its plantation in Tarakan, Kalimantan.
QL benefits from the government's pro-agriculture stance via tax incentives that translate to a lower tax rate (15% in FY10) and subsidised diesel for its deepsea fishing operations. The group's latest venture into renewable energy is directly in accordance with the government's promotion of green technology as contained in Budget 2011.
Despite what seems like expensive valuations, we are bullish on QL as we firmly believe it deserves premium valuation to peers as well as the market. QL's next two years' earnings CAGR of 16.1% is impressive compared with Malaysian peers of 5.6%. Furthermore, over the last 10 years, QL's average 12-month forward earnings growth is impressive at 23%. At our target price, PEG ratio is undemanding at only 0.9 times based on 10-year average growth rate. ' ECM Libra Investment Research, Dec 14
This article appeared in The Edge Financial Daily, December 15, 2010.
Company Name: QL RESOURCES BHD
Research House: ECMLIBRA
QL Resources Bhd
(Dec 14, RM5.69)
Initiate coverage with a buy call at RM5.60 and target price of RM7.30: We initiate our coverage of QL Resources with a 'buy' recommendation and target price of RM7.30 based on 20 times CY11 PER. QL's products will benefit directly from rising global demand and price trends for food commodities. The group is one of Asia's largest surimi manufacturers and a Malaysian market leader in livestock feed trading, fish meal and egg production.
We have forecast a three-year forward forecast EPS CAGR of 17.3% (FY11/13), that will be driven by strong demand for QL's marine, livestock feed, poultry products and palm oil, with rising population and disposable income, as well as the group's steady capacity expansion. Diversification reduces earnings volatility by smoothing out the cyclical nature of its resource-based activities.
QL's expansion plan is both local and regional, with total group capex set to increase by 60% in the next two years to RM200 million annually. The group is replicating its business model in the Asean region with: (i) new poultry farms in Tay Ninh, Vietnam, and Cianjur, Indonesia; (ii) a new marine plant being constructed in Surabaya; and (iii) further planting and palm oil mill slated for its plantation in Tarakan, Kalimantan.
QL benefits from the government's pro-agriculture stance via tax incentives that translate to a lower tax rate (15% in FY10) and subsidised diesel for its deepsea fishing operations. The group's latest venture into renewable energy is directly in accordance with the government's promotion of green technology as contained in Budget 2011.
Despite what seems like expensive valuations, we are bullish on QL as we firmly believe it deserves premium valuation to peers as well as the market. QL's next two years' earnings CAGR of 16.1% is impressive compared with Malaysian peers of 5.6%. Furthermore, over the last 10 years, QL's average 12-month forward earnings growth is impressive at 23%. At our target price, PEG ratio is undemanding at only 0.9 times based on 10-year average growth rate. ' ECM Libra Investment Research, Dec 14
This article appeared in The Edge Financial Daily, December 15, 2010.
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