CAB Cakaran Corporation Bhd
POULTRY companies have long been viewed as unexciting with volatile earnings following a series of epidemics in the last few years. As a result, poultry stocks have not attracted much attention — until this year, as an earnings recovery, underperforming stock prices, low valuations and merger and acquisition (M&A) activities spurred interest.
CAB Cakaran Corporation saw flattish share price performance prior to 2014, but has performed very well this year on the back of improving earnings and speculation of M&A activities.
CAB recorded a 13.9% rise in revenue for FY September 2013 to RM609.0 million. Net profit jumped to RM11.9 million from losses in the previous year, although it included a fair value adjustment gain on investment properties worth RM7.1 million.
For 3QFY2014 however, although CAB posted a 13.1% increase in revenue to RM170.4 million, it posted a small RM10,000 net loss, reflecting the industry’s volatility amid slim margins.
The company has net gearing of 65% and gross cash of RM16.6 million as at 3QFY2014, with a market capitalization of RM144.72 million.
CAB may be attracting interest due to earlier reports that the US-based Cargill group was interested in acquiring a controlling stake in the company. Recently, another poultry player, Lay Hong Bhd, also saw a take-over offer from QL Resources Bhd.
Fundamentally, CAB’s valuations are considerably lower than its peers.
At RM1.10, the stock trades at a price-to-book value of 0.99 times and 12-month trailing P/E of 9.65 times. By comparison, Lay Hong Bhd is trading at a price-to-book ratio of 1.36 times and a 12-month trailing P/E of 12.53 times while CCK Consolidated Bhd is trading at P/BV of 0.96 with a 12-month trailing P/E of 9.91 times.
This article first appeared in The Edge Financial Daily, on December 1, 2014.