London Biscuit gains 4.17% after 28.58%-owned Khee San hit multi-year high

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KUALA LUMPUR (July 20): Shares of London Biscuit Bhd gained as much as 4.17% to 87.5 sen today, after the share price of its 28.58% owned-unit, Khee San Bhd, hits multi-year high.

At 12.30pm, London Biscuit was up 3.57% or 3 sen to 87 sen, with 3.43 million shares having changed hands. London Biscuit has a market capitalisation of RM162.28 million.

Khee San (fundamental: 0.3; valuation: 1.7), a candy manufacturer, was traded at 88 sen, up 2.5 sen or 2.92%, with 3.29 million shares done, giving it a market capitalisation of RM78.38 million. Its shares gained as much as 4.09% or 3.5 sen earlier, hitting a multi-year high of 89 sen since 2008.  

It is also worth noting that year-to-date, Khee San’s share price has climbed 76%, from 50 sen on Jan 3.

At 88 sen, the block of Khee San’s shares owned by London Biscuit was valued at about RM17.35 million. London Biscuit (fundamental: 0.5; valuation: 1.7 ) acquired Khee San’s stake in 2007 and it is currently the largest shareholder of Khee San.

Meanwhile, in a note today, Hong Leong Investment Bank Research said London Biscuit is poised to break 52-week high of 92.5 sen.

The research house also said London Biscuit, the largest domestic manufacturer of assorted wafers and confectioneries, is “likely to rerate upwards, amid undemanding valuations”.

It said local food and beverages (F&B) sector would likely stay resilient and defensive amid the challenging market environment, and suggested investors should scout out for small cap undemanding F&B companies such as London Biscuit to tap into their steady growth in local and international markets.

“At 84 sen, London Biscuit is trading at 9.8 times FY15 P/E (36% lower than its peers) and 0.4 times price-to-book value (P/B) (78% lower), probably to discount for its poor return on equity,” it added.

Nevertheless, the research house said the huge discounts are likely to reduce, as London Biscuit is reaping the rewards of its heavy capex over the past four years, to help boost capacity, efficiency and productivity to offset the hike in raw materials, wages and utilities prices, coupled with increased competition.

(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.)