| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM1.07 (+39.9%) |
| Last Traded | RM0.765 |
| Recommendation |
A recent investment bank research report indicates a strong financial performance, with the company’s core earnings significantly surpassing expectations for the fourth quarter and full fiscal year 2025 (FY25).
Performance Review
The company reported 4QFY25 core earnings of RM179.9 million, contributing to a full FY25 core profit of RM501.1 million, marking a 16.8% year-on-year (YoY) increase. These results considerably exceeded both the investment bank’s forecast (117%) and consensus estimates (130%), primarily attributed to stronger-than-anticipated EBIT margins in 4QFY25.
Despite a 5.2% YoY decline in FY25 revenue to RM8.8 billion, the earnings growth was robust. This was mainly driven by enhanced EBIT margins within the livestock and poultry segment, complemented by a substantial 32.5% YoY reduction in interest expense to RM77.0 million. The improved performance in the livestock and poultry segment stemmed from stronger margins across Malaysia, Singapore, Vietnam, and the Philippines markets, benefiting from lower feed costs and higher Average Selling Prices (ASPs).
Conversely, the feedmill segment experienced a challenging year, with revenue declining 11.7% YoY to RM3.4 billion in FY25. This was due to lower ASPs and sales volumes in Malaysia, reduced ASPs in Indonesia, and weaker sales volumes in Vietnam, reflecting softer utilization. Segment EBIT consequently fell 9.3% YoY to RM495.1 million.
Future Outlook and Challenges
Following the impressive performance, the investment bank has revised its earnings forecasts for FY26 and FY27 upwards by 24.9% and 28.7% respectively, factoring in higher EBIT margin assumptions. Management remains optimistic about achieving satisfactory performance in FY26, underpinned by a stable outlook for feed input costs and continued stringent cost management.
However, the company is currently facing a significant legal challenge. It initiated judicial review proceedings on February 23, 2026, to contest the Competition Appeal Tribunal’s (CAT) decision upholding a RM157.5 million fine imposed by the Malaysia Competition Commission related to a price-fixing cartel case involving its subsidiary. In a worst-case scenario where the full penalty is payable, the group’s pro-forma net gearing is estimated to increase to 0.4x from 0.3x, assuming the settlement is financed through internal cash reserves. As of 4QFY25, the company’s cash and bank balances stood at RM1.0 billion. The total fine represents approximately 28.8% of the FY26 core earnings forecast.
Recommendation and Valuation
TA SECURITIES maintains a BUY recommendation for the company, with a revised target price of RM1.07 per share. This new target price, an increase from the previous RM0.83 per share, follows the roll-forward of the valuation base year to CY27 and applies a 7x Price-to-Earnings Ratio (PER).
