GEORGE TOWN (Aug 28): Integrated poultry producer CAB Cakaran Corp Bhd, which returned to the black in the third quarter ended June 30, 2015 (3QFY15), is looking for more merger and acquisition activities domestically as well as organic growth to enlarge its current production capacity.

It targets to produce over 5 million birds per month next year.

“We currently produce 4.2 million broiler birds per month, which is 20% higher than the 3.5 million birds that we produced last year. This is mainly contributed by our newly-acquired farm in Johor," said CAB Cakaran group managing director Chris Chuah Hoon Phong in a statement yesterday.
 
The group currently has 10 breeder farms and 140 broiler farms acros Peninsular Malaysia, which contribute about three quarters of its revenue.
 
“We will spend between RM10 million and RM20 million this year to expand our breeder farms in Juru, Penang and Padang Meha, Kedah. With this expansion, we will achieve a capacity of 5 million boiler birds per month next year,” said Chuah.
 
He said with the increase in its production capacity and merger and acquisition activities, the group targets to register a revenue of close to RM900 million by the current financial year ending Sept 30, 2015 (FY15), compared with RM672 million in FY14.
 
CAB Cakaran posted a net profit of RM7.98 million in 3QFY15, reversing its net loss of RM1,000 a year ago.

This was in tandem with the higher revenue, which rose 36.4% to RM232.42 million in 3QFY15 from RM170.37 million in 3QFY14 due to the increase in sales of the integrated poultry farming and processing division.

For the nine months period (9MFY15), its net profit increased 62.2% to RM7.25 million from RM4.46 million in 9MFY14, while revenue grew 27.5% to RM628.91 million from RM493.21 million.

CAB Cakaran attributed the higher revenue for 9MFY15 to the increase in sales of the integrated poultry farming and processing division, as well as higher average selling price for broiler birds.

"The better results were also due to contributions from its 51%-owned Singapore entity, Tong Huat Poultry Processing Factory Pte Ltd, which has started contributing since June this year," it said.

However, CAB Cakaran warned that its integrated poultry farming and processing division performance over the coming quarter (4QFY15) may be adversely affected by higher feed cost due to the weakening ringgit and lower average selling price of broilers resulting from oversupply situation.

"Nevertheless, the management is confident that despite the adverse outlook, the division will still be able to contribute positively to group’s profit," it said in a filing with Bursa Malaysia today.

It noted that since the implementation of the goods and services tax in April, sales for the supermarket division have been on a declining trend and with management’s decision to continue with promotional activities to arrest declining sales, this division will continue to incur a small operating loss.

"Barring unforeseen circumstances, such as rising cost of imported raw materials, the value added food products manufacturing and trading division is expected to maintain its current quarter performance.

"The marine products division is not expected to improve on its performance due to the difficult trading condition for prawns.

On the impact from the weakening ringgit to the US dollar, CAB Cakaran group managing director Chris Chuah Hoon Phong said the impact is minimal as over 95% of its production cost is traded in ringgit, adding that the products traded in US dollars is less than RM4 million a year.

“In fact, when the US dollar is expensive, the chickens that are imported by other operators into Malaysia will become more costly. This benefits CAB Cakaran as our chickens are produced locally,” he added.

Meanwhile, Chuah disclosed that the group has been working closely with Japan's New Chemical Trading Co Ltd to work on the costing of a biomass power generation plant, its location and other related issues, adding that it should be finalised in the near term.
 
“This is a new and exciting business venture for CAB Cakaran where we are utilising our current waste to generate recurring income for the company going forward. This is our first step to venture into downstream in the poultry farming business,” he said.

CAB Cakaran had in March this year signed a memorandum of understanding with New Chemical Trading and Seri Kedah Corp Sdn Bhd to establish the biomass power generation plant.

New Chemical Trading is 90% owned by Nippo Holdings Co Ltd and 10% owned by Nippon Steel & Sumikin Chemical Co Ltd.

CAB Cakaran (fundamental: 0.2; valuation: 1.1) shares closed 4.5 sen or 5.03% higher at 94 sen yesterday, giving it a market capitalisation of RM134.63 million.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)