Stock With Momentum: Huat Lai

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This article first appeared in The Edge Financial Daily, on November 3, 2015.


Huat Lai Resources Bhd (-ve)

INTEGRATED poultry farmer Huat Lai (Fundamental: 0.75/3 Valuation: 1.10/3) triggered our momentum algorithm for the first time yesterday. The stock jumped 8.6% to close at RM3.80, despite an announcement of Festive Season Price Control Scheme last Friday.

The proposed price control scheme will be imposed on 18 food items, including chickens and grade A, B, C eggs for 10 days starting November 5, in conjunction with Deepavali on November 10. Notably, prices of eggs have recovered since falling to one-year lows in August.

Malacca- based Huat Lai is one the largest poultry players in Malaysia. For 2014, the company derived 87.6% of its RM1.2 billion revenue from the sale of livestock products such as eggs and broiler chickens. 

For 1H2015, sales rose 22.6% y-y to RM720.5 million while net profit surged 120.4% to RM49 million, mainly contributed by higher sales of poultry products and better selling prices of live broilers. Net gearing is high at 180.5%.