| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A recent investment bank research report indicates a strong financial performance, with the company’s core profit for the 18 months ending FY25 (18MFY25) significantly exceeding expectations. The reported core profit of RM88.6mn beat analyst projections by a notable 7%, primarily attributed to higher-than-anticipated revenue generation.
Performance Review
The final quarter of FY25 (6QFY25) showcased exceptional growth, with revenue soaring by 49.5% year-on-year (YoY) to RM101.5mn. This impressive increase was driven by bumper harvests and robust demand from international customers. The positive impact translated into a substantial 119% surge in adjusted Profit Before Tax (PBT) to RM36.9mn. A key factor contributing to this uplift was an 11.5 percentage point improvement in the adjusted PBT margin, reflecting enhanced operating efficiency stemming from increased harvests.
On a quarter-on-quarter (QoQ) basis, despite a 15.1% drop in 6QFY25 revenue, a more significant 29.0% reduction in the cost of goods sold led to a remarkable 62% expansion in gross profit. This efficiency gain resulted in adjusted PBT surging by over 300% QoQ, underscoring effective cost management.
Future Outlook and Challenges
Looking ahead, the investment bank has revised its earnings projections for FY26-28 upwards by 15-25%. This positive adjustment is largely due to expectations of lower imported feed mill costs, bolstered by the strengthening of the Ringgit. Annual harvest volumes are anticipated to remain steady at 5,500 metric tons per year, supported by the adoption of smart farming systems and new probiotic supplements which contribute to a prawn survival rate exceeding 80%. Despite a substantial impairment of a loan to a former subsidiary, which reduced the group’s reserves to RM16mn, the report assures that the combination of positive reserves and healthy cash flow will not impede the company’s future dividend-paying capabilities. However, the strong Ringgit also led to the company revising its average selling prices (ASPs) higher three times last quarter, resulting in some pressure from customers.
Valuation and Recommendation
The investment bank has adjusted its valuation methodology from a sum-of-parts approach to a Price-to-Earnings (PE) multiple approach, following the full impairment of the loan to the former subsidiary. Concurrently, the target price (TP) for the company has been raised to RM0.21 (from an earlier RM0.18), based on an unchanged PE of 8x CY26 EPS. Reflecting these positive developments, the analyst has upgraded its recommendation for the stock from “Hold” to “BUY”.
