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Author: PublicInvest   |   Latest post: Fri, 18 Oct 2019, 9:14 AM

 

Three-A Resources Berhad - Steady Growth

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Three-A Resources (3A) reported an improved 2QFY19 net profit, up by 18.6% YoY to RM6.3m. Cumulative 1HFY19 net profit of RM13.7m improved by 19% YoY. It was below our expectations at 37% of full year estimates however, this coming largely due to an underestimation of operating expenses and effective tax rates. We trim our earnings forecast for FY19F-FY21F by 8.6%-9.7% to account for these accordingly. Nevertheless, we continue to remain optimistic on 3A’s long term prospects due to i) lower tapioca prices and the relatively resilient F&B industry despite slower economic growth iii) management’s continuous efficiency initiatives and cost optimization plans to increase productivity, and iv) healthy balance sheet with a net cash position. We maintain our Outperform rating with a lower TP of RM1.08 (previously RM1.13) as we roll over our valuation base year to FY20F based on 15x to a lowered FY20 EPS.

  • 2QFY19 revenue rose by 6.4% YoY to RM107.9m, driven by stronger sales in all geographical segments and higher average selling price of products sold. The Malaysian market remains as the largest revenue contributor for 3A, accounting for 60.8% of total sales. For cumulative 1HFY19, total exports grew by 12.2% in both Singapore and Other countries segment.
  • 2QFY19 PBT jumped by 21.5% YoY underpinned by lower raw material prices and higher average selling prices of products sold. Global tapioca prices have been lower as compared to FY18, thus leading to an improvement in YoY gross profit margins (2QFY19: 16% vs 2QFY18: 13.8%). However, when compared to the immediate preceding quarter, PBT fell by 16.9% QoQ mainly attributable to the higher raw material prices and impairment loss on receivables. Moving forward, we expect to see continued improvements in 3A’s margins in view of lower global tapioca prices, supported by the better economies of scale from its third maltodextrin plant.

Source: PublicInvest Research - 20 Aug 2019

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Chart Stock Name Last Change Volume 
3A 0.795 -0.005 (0.62%) 35,000 

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