Quick take: Leong Hup’s shares up 10% in active trade

KUALA LUMPUR: Leong Hup International Bhd rose almost 10% in early trade Friday in active trade on expectations that the company’s earnings will improve in the current third quarter ending Sept 30.

The poultry group rose 9.87%, or 7.5 sen to 83.5 sen. It is one of the most active counters on Bursa Malaysia with over 9.04 million shares traded

Leong Hup reported a 76% fall in net profit to RM16.09mil for the second quarter ended June 30,2019 from RM65.66mil in the previous corresponding quarter.

This was dragged by price fall in the average selling prices of broiler day-old-chicks and broiler chickens.

Its quarterly revenue, however, grew 4% to RM1.48bil from RM1.42bil in the previous corresponding quarter.

Its group chief executive officer Tan Sri Lau Tuang Nguang said the group’s earnings is expected to improve in the current third quarter ending Sept 30.

For the first half of this year, Leong Hup’s revenue rose 7.7% to RM2.98bil from RM2.77bil a year ago.

Its profit after tax and minority interest declined 35.2% to RM76.69mil from RM118.34mil.

Leong Hup declared an interim single tier dividend of 1.6 sen per share amounting to RM58.4mil.

MIDF Research said Leong Hup’s earnings in the 1HFY19 earnings to RM76.7mil, came in line with the house but lagged consensus expectation, accounting for 40% and 36% of its full year FY19 forecast respectively.

The poor 2QFY19 earnings was driven by the subdued performance of livestock and poultry related segment.

During the quarter, there was a significant reduction in average selling price (ASP) of the products sold by the group, particularly in Malaysia.

“Nonetheless, we expect better earnings going forward due to the recent price recovery, ” MIDF said.

The research house said Leong Hup had declared its first interim dividend of 1.6 sen per share for FY19.

At the current price, this represents a dividend yield of 2.1%. Note that LHI has a dividend policy of at least 30.0% payout ratio.

From June 2019 onward, MIDF observed that selling prices of broiler DOC and broiler chicken are on a recovery trend in Malaysia.

The latest ASP for broiler DOC and broiler chicken have recovered to about RM2.00 per DOC (+33.5qoq) and RM5.00 per kg (+32.7%qoq) respectively.

“Hence, we expect margins and profitability of the livestock segment will improve in the subsequent quarters.

“Furthermore, the group earnings is supported by the strong performance of its feedmill segment and this is expected to continue given the recent ramp-up of feedmill operation in Vietnam and the Philippines, ” MIDF said.

Source: TheStar