Stock Name: QL
Company Name: QL RESOURCES BHD
QL Resources Bhd
(Oct 17, RM2.86)
Maintain buy at RM2.84 with revised fair value of RM3.62 (from RM3.81): In Surabaya, Indonesia, QL's surimi and fishmeal businesses started contributing to its bottom line in August this year, ahead of its forecast timeline of 1QFY13. The surimi plant started commercialisation in July and the fishmeal plant in August ' each with a production capacity of 5,000 tonnes per year ' and are expected to hit 4,000 tonnes per year each by 1QFY13. In Tay Ninh, Vietnam, QL targets to ramp up production capacity from 80,000 eggs per day currently to 500,000 by 3QFY13.
As for the new poultry project in Cianjur, Bandung, Indonesia, production is expected to hit one million eggs per day (100,000 currently) by 4QFY13, while its breeder farm nearby will produce 1.5 million day-old chicks (DOC) per month (1.2 million currently) by 4QFY12. Both the egg and DOC businesses have broken even at the operating level, and are expected to contribute to the bottom line in 1QFY13.
The new crude palm oil mill located in Indonesia is targeted to be completed before November this year, while its oil palm estate is planted at 10,000ha (as at August 2011) with planting expected to finish at 15,000ha by FY14. Its biogas plant was completed in August'' this year and is supplying power to its palm pellet plant (with a production capacity of 3,000 tonnes per month) which has commercialised at the same time.
QL is targeting to launch its palm pellet plant by end-November. With the palm pellet plant, QL could convert its in-house waste, empty fruit bunches (EFB) to palm pellets for generating biogas energy.
Given that QL is involved in the selling of basic and highly affordable food, demand will be resilient. In our conversation with the management, we also noted that the prices of its products, such as surimi, fishmeal and eggs, are expected to be relatively stable.
Furthermore, QL has large economies of scale which ensures that selling prices will be above cost most of the time.
We estimate that the new expansion will contribute about 3% and 12.4% to FY12 and FY13 net profit respectively. While QL's fundamentals remain unchanged, we trim our FY12 and FY13 earnings forecasts by 2.9% to 5.6%, following some historical number updates by management. ' OSK Research, Oct 17
This article appeared in The Edge Financial Daily, Ocotber 18, 2011.
Company Name: QL RESOURCES BHD
| Research House: OSK | Price Call: BUY | Target Price: 3.62 |
QL Resources Bhd
(Oct 17, RM2.86)
Maintain buy at RM2.84 with revised fair value of RM3.62 (from RM3.81): In Surabaya, Indonesia, QL's surimi and fishmeal businesses started contributing to its bottom line in August this year, ahead of its forecast timeline of 1QFY13. The surimi plant started commercialisation in July and the fishmeal plant in August ' each with a production capacity of 5,000 tonnes per year ' and are expected to hit 4,000 tonnes per year each by 1QFY13. In Tay Ninh, Vietnam, QL targets to ramp up production capacity from 80,000 eggs per day currently to 500,000 by 3QFY13.
As for the new poultry project in Cianjur, Bandung, Indonesia, production is expected to hit one million eggs per day (100,000 currently) by 4QFY13, while its breeder farm nearby will produce 1.5 million day-old chicks (DOC) per month (1.2 million currently) by 4QFY12. Both the egg and DOC businesses have broken even at the operating level, and are expected to contribute to the bottom line in 1QFY13.
The new crude palm oil mill located in Indonesia is targeted to be completed before November this year, while its oil palm estate is planted at 10,000ha (as at August 2011) with planting expected to finish at 15,000ha by FY14. Its biogas plant was completed in August'' this year and is supplying power to its palm pellet plant (with a production capacity of 3,000 tonnes per month) which has commercialised at the same time.
QL is targeting to launch its palm pellet plant by end-November. With the palm pellet plant, QL could convert its in-house waste, empty fruit bunches (EFB) to palm pellets for generating biogas energy.
Given that QL is involved in the selling of basic and highly affordable food, demand will be resilient. In our conversation with the management, we also noted that the prices of its products, such as surimi, fishmeal and eggs, are expected to be relatively stable.
Furthermore, QL has large economies of scale which ensures that selling prices will be above cost most of the time.
We estimate that the new expansion will contribute about 3% and 12.4% to FY12 and FY13 net profit respectively. While QL's fundamentals remain unchanged, we trim our FY12 and FY13 earnings forecasts by 2.9% to 5.6%, following some historical number updates by management. ' OSK Research, Oct 17
This article appeared in The Edge Financial Daily, Ocotber 18, 2011.
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