Quick take: Kawan Food shares fall 7.6% after drop in Q3 earnings

KUALA LUMPUR: Shares in KAWAN FOOD BHD fell over 7.6% in early trade Wednesday after the company’s net profit fell 64% in the third quarter ended Sept 30.

The frozen food manufacturer, one of the top losers on Bursa Malaysia, shed 7.64%, or 12 sen to RM1.45 with 586,300 shares done. It is currently trading at a PE ratio of 25.2 times.

Kawan Food’s net profit fell 64% to RM2.54mil in the third quarter ended Sept 30, compared with RM7.09mil posted in the same period a year ago.

Revenue, however, was higher at RM50.14mil against RM48.49mil in the same corresponding period last year.

In the first nine months, its net profit plunged 60% to RM6.86mil on revenue of RM157.68mil.

CGS-CIMB Research said Kawan Food’s 9M19 core net profit was below expectations at 41% of the house and 45% of Bloomberg consensus full-year forecasts due to higher operating costs.

The research house noted Kawan Food had RM19.6mil net cash or 5.5 sen net cash per share as at end-Sep2019.

“With no major capex ahead, we forecast a 40% net dividend payout ratio for FY19-21F, ” it said.

“Downgrade from ‘add’ to ‘hold’. Our target price rises to RM1.58 as we roll forward our valuation. The stock is not cheap at 2020F18.8xP/E after its recent rise, ” CGS-CIMB said.

Source: TheStar