Thursday 28 Mar 2024
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KUALA LUMPUR (Apr 17): Shares in Oriental Food Industries Holdings Bhd (OFI) advanced as much as 17 sen or 3.61% today after Kenanga Investment Bank (Kenanga IB) said the company's earnings remained intact.

At 3.56pm, the stock pared down part of its gains to trade at RM4.83, still up 13 sen or 2.77% with some 200,300 shares done. The current price gives it a market capitalisation of RM291 million.

The stock, which was featured as Insider Asia's Stock Pick on Oct 23 last year, was also the ninth largest gainer of the day across the bourse.

In a note to client on Thursday, Kenanga IB projected that the net profit growth for OFI stood at 25.8% and 11.4% for FY15 and FY16 respectively, on the back of the stronger US dollar and higher export sales.

The firm said OFI (fundamental: 2.8; valuation: 1.4) is on track to surpass its FY14 net profit of RM16.2 million. It also projected that OFI will generate RM20.3 million and RM22.7 million net profit for FY15 and FY16 respectively.

Kenanga also said the export sales of OFI will continue grow due to the robust demand in key Asian market, which contributes approximately one-third of the group's total revenue.

"We also understand that its sales in South American markets were encouraging," it added.

Kenanga noted export sales accounted for 55% of OFI's total revenue and the management indicated that under the current strengthening of the US dollar against the ringgit, every 10 sen appreciation will result in an extra RM1.5 million in profit.

It also noted that the group will embark on next expansion phase starting end of financial year 2016 (FY16).

"We like the group for its robust earnings growth, underpinned by strong US dollar and robust overseas demand," the firm said, adding high export content of  over 55% which made it a strong thematic play in view of the strong US dollar.

To recap, OFI registered a net profit of RM14.6 million on the back of higher revenue of RM178.1 million for the cumulative nine months for the financial year ended Feb 28, 2015 (9MFY15) driven by stronger export sales.

(Notes: 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.)

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