Stock Name: QL
Company Name: QL RESOURCES BHD
Company Name: QL RESOURCES BHD
| Research House: OSK | Price Call: BUY | Target Price: 3.64 |
Following our recent meeting with management, we are optimistic that QL Resourceswill continue to deliver solid earnings growth in line with its on-track expansionin the ASEAN region. We are expecting the group's Indonesia and Vietnamoperations to start contributing in FY13. Maintain BUY with a FV of RM3.64,given its solid performance and resilient business nature.
Still rocks. QLResources transformed from a livestock feed trading company (that was complementedby its smaller fisheries and palm oil businesses) into a leading marine andpoultry egg producer (complete with a fast-growing palm oil business) over the years.With exposure to three sustainable basic food industries, its strong business modelhas enabled QL to deliver sterling results on a consistent basis. Over theyears, the company has expanded its operations through upstream/downstreamintegration, innovation and acquisition.
Regional expansionbearing fruits. Going forward, webelieve the earnings excitement will largely come from its regional exposure inIndonesia and Vietnam. On the marineside, QL is adding another 5k tonnes p.a. capacity to its current surimi and fishmealproduction facilities in Surabaya, increasing the overall production capacityto 10k tonnes p.a. by end-FY13. Also, we are expecting contributions fromIndonesia and Vietnam's poultry operations to kick in from FY13 onwards, giventhat the expansions are all on track. As for the palm oil division, the 20k haplantation and new CPO mill in Indonesia will undoubtedly bring the company tothe next level.
Defensive in nature. As QL is involved in the basic food industrywhere demand is resilient even during economic slowdowns, we are confident thatthe company's outlook remains promising. With QL venturing into Asean countrieswith growing populations such as Indonesia and Vietnam, such regional expansions could open up newand profitable markets that bode well for the company's future growth.
Maintain BUY. OurFV of RM3.64 is based on 19x CY12 EPS. Given the recent share price retracement(which was largely due to the market correction), we see this as a good opportunityto BUY QL shares. This stock is one of our Top 2012 Buys in view of its highly defensivenature and aggressive overseas expansion strategy.
Source: OSK188
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