Capital markets executive summary | Wed 31 May 2023

Capital markets executive summary | Wed 31 May 2023

Farm Fresh 4Q net profit plunged 72.35%

The figure fell from RM17.68m the prior year to RM4.89m in 4Q ended 31 Mar 2023. The poor results were blamed on higher raw material costs, weaker foreign exchange rate, higher distribution costs, larger salary expenses following the 25% increase in minimum wage and fair value loss on biological assets. Earnings per share declined from 1.08 sen to 0.26 sen. The company did not declare any dividends. This is despite revenue growing 26% from RM128.07m to RM161.36m driven by Ramadan sales, school milk programme and improvement in Australian operations. For the full year, net profit fell 37.31% from RM79.89m to RM50.08m. Full year revenue was up 25.46% from RM501.92m to RM629.69m. Better sales of ready-to-drink milk products and new products bumped up revenue. Looking ahead, the company sees milk ingredient costs and feed costs falling. The Taiping processing plant will begin production in Jun 2023 and help raise the chilled milk production capacity and lower logistics costs for supply to the northern states. The Muadzam Shah plant in Pahang is also providing capacity. The Philippines plant will be operational in 2H2023. The counter closed at RM1.55.

QL Resources 4Q net profit up 5.6%

The company’s earnings grew from RM69.42m the prior year to RM73.32m in 4Q ended 31 Mar 2023 due to higher margins. Earnings per share climbed from 2.85 sen to 3.01 sen. Revenue increased 8.3% from RM1.36b to RM1.47b despite the delay in the new fishing season this year. The company’s FamilyMart chain opened 14 new stores in 4Q. For the full year, net profit rose 59.59% from RM217.35m to RM346.82m. Revenue increased 19.63% from RM5.23b to RM6.26b. The post-pandemic surge in livestock business, government cost subsidy to deal with high input costs and healthy growth in the marine food business helped deliver the results. Higher interest rates and cost of living are expected to dampen consumer demand. Changes to the egg and chicken subsidy to market-driven pricing mechanism and volatile commodity prices may affect the livestock business. The counter closed at RM5.56.

Bank Islam 1Q net profit up 11.5%

The bank delivered better earnings from RM105.92m to RM118.09m as investment income improved and despite higher personnel and overhead expenses. Earnings per share rose from 4.95 sen to 5.33 sen. Revenue increased 42.62% from RM773.97m to RM1.10b. The market’s concern about Bank Islam’s asset quality was put to rest as the bank – which is focused on retail banking – recorded gross impaired financing ratio of 1.37%, better than the industry average of 1.75%. The improvement in investment income was driven by income from investment of depositors’ funds, which jumped 36.5% from RM587.63m to RM802.13m. Gross financing gained 10.7% year-on-year to RM66.2b. Customer deposits and investment accounts grew RM9.7b or 14.3% to RM77.8b. The annualised return on equity was 7% compared to 7.5% at end-2022. The bank’s total capital ratio was 21.2%, up from 19.39% at end-2022. The counter closed at RM1.87, down 33% this year.

Singapore’s GIC to buy stake in Germany’s Messer for EUR2b

The purchase by the sovereign wealth fund of less than 25% interest in the industrial gas maker values the company at EUR12b (RM59.5b) including debt. The century-old family-owned German company based in Bad Soden will use the proceeds to buy full control of Messer Industries GmbH – a joint venture with CVC Capital Partners – which would value the target at EUR8b. Messer Industries was established in 2018 to buy North and South American assets of Linde to secure antitrust approval for its USD46b merger with Praxair Inc. The company also owns assets in Western Europe. Messer has no plans for an initial public offering.

Singapore’s Olam Agri dual IPO to be delayed

Shares of agri-food giant Olam Group fell 6.9% after it announced that the simultaneous initial public offering (IPO) in Singapore and Saudi Arabia will not completed in 1H2023 as originally planned. The dual listing which could raise USD1b will be the 1st such IPO in the world. Olam Agri will be the 1st non Gulf Cooperation Council incorporated business to list in Saudi Arabia and the 1st company to list in both countries. The company said that the regulatory approvals have not been obtained. It will nonetheless look out for the next listing window. In 2022, Olam sold 35.4% of Olam Agri to Saudi Agriculture and Livestock Investment Co, a unit of Saudi Arabia’s sovereign wealth fund Public Investment Fund. That deal valued Olam Agri at USD3.5b. After Olam Agri, the next target will be to list Olam Food Ingredients. Olam is one of the world’s biggest agriculture commodity traders and is 51% owned by Temasek and 14.4% by Mitsubishi Corp. The counter closed at SGD1.38.