BIMB SECURITIES RESEARCH

MARKET INSIGHT
PP16795/03/2013(031743)

Wednesday, 23 May, 2012

Results Review

QL Resources Berhad
Inline All Well Ends Well
QLG MK 2,629.1 Equity 832.0 3.42 2.51 327,187 41.1% Y

Buy
Price: Target Price:
3.6 2.6% 1.1% 0.9 44.9% 12.9%

RM3.16 (17% upside) RM3.70

Stock Data Bloomberg Ticker Market Cap Issued shares 52-week range (H) 52-week range (L) 3-mth avg daily volume Free Float Shariah Compliant Share Performance (%) Absolute vs. KLCI

Altman Z-score YTD price chg YTD KLCI chg Beta Major Shareholders
CBG Holdings S/B Farsathy Holdings SD

1mth 0.6 (8.2)

3mth (4.2) (3.4)

12mth (6.5) (8.2)

Financial Highlights FYE Mar(RMm) 2010 Revenue 1,476.4 EBIT 148.6 Pretax profit 136.2 Net Profit 106.4 CY Net Profit 120.0 EPS (sen) 12.8 EPS growth (%) 19.2% CY EPS (sen) 14.4 PER (x) 24.7 DPS (sen) 3.6 Div. Yield (%) 1.1% NTA/share (RM) 0.60 EBIT margin Pretax margin Effective tax rate ROE ROA Net Gearing (x) Growth ratios Turnover EBIT Pretax profit Net profit Share Price Chart
3.50 3.40 3.30 3.20 3.10 3.00 2.90 2.80 2.70 2.60 2.50 May-11

QLs FY12 results were within ours and consensus estimates, accounting for 95% and 96% respectively. Earnings were buoyed by strong performance in the POA as well as ILF division whereby PBT grew by 148% and 7% respectively from previous year. The remarkable increased of POA was mainly due to higher contribution from its own estates and from its associate, whereby for ILF, the improved revenue was attributed to higher farm products price. As such, we have tweaked our FY13 and FY14 earnings estimates upwards. Following the earnings revision, target price is now tagged at RM3.70 from RM3.43 before. Upgrade QL to a BUY. Strong top-line growth. Full year revenue grew 10% to due to the expansion strategy of its 3 divisions, namely the maiden contribution from Indonesias surimi and poultry farm operations, and higher contribution from plantation operations. Overall margin was slightly reduced due to lower margin from feed raw material trade in its ILF division. MPM earnings. As expected MPM full year earnings decreased 3% mainly due to lower landing of fish in Q1 and Q2. QoQ, the decreased in sales and earnings was due to seasonal factor and lower fishmeal prices during the quarter. Despite that, sales and PBT increased 8% and 29% yoy respectively due to higher contribution from surimibased operations in Malaysia as well as Indonesia. Revising our FY13-FY14 earnings forecast. We have revised our FY13 and FY14 earnings forecasts to RM162.1m (+5.4%) and RM176.7m (+2%) respectively driven by growth in all 3 divisions; especially from POA division - as the 20,000 hectare Indonesia plantation reaches maturity and to start delivering positive contribution in FY13 onwards. Groups earnings will be further supported by its poultry farm in Vietnam, where contribution is expected to come onstream by FY13. Financial leverage is manageable with net gearing of 0.61x as at FY12 with strong interest coverage of 11x. The final dividend of 4.5sen was declared translating into yield of 1.4%. View & Valuation. Following the earnings revision, we revised our target price upwards from RM3.43 to RM3.70 by applying FY13 EPS over its PER multiple of 19X which is +1std.dev of its past 3-years PE valuation justified by its resilient growth fundamentals and expectation that regional expansion on both of its poultry farms (Indonesia and Vietnam) and oil palm plantations (Indonesia) are starting to provide significant contribution in FY13 onwards. We upgrade QL to BUY.

2011 1,776.8 174.6 160.8 124.6 130.2 15.0 17.0% 15.7 21.1 4.3 1.3% 0.87 9.8% 9.1% 16.8% 20.1% 8.5% 0.51

2012 1,946.9 190.3 172.8 132.1 154.6 15.9 6.0% 18.6 19.9 4.5 1.4% 0.84 9.8% 8.9% 19.3% 17.1% 7.9% 0.61

2013E 2,269.2 230.0 212.0 162.1 173.1 19.5 22.7% 20.8 16.2 5.5 1.7% 0.98 10.1% 8.1% 19.0% 18.6% 9.1% 0.59

2014E 2,476.4 248.8 230.1 176.7 196.4 21.2 9.0% 23.6 14.9 6.0 1.9% 1.13 10.0% 8.1% 19.0% 17.8% 9.2% 0.53

10.1% 9.2% 15.8% 23.1% 9.6% 0.61

5.6% 18.4% 23.9% 19.2%

20.3% 17.5% 18.1% 17.0%

9.6% 9.0% 7.5% 6.0%

16.6% 20.9% 22.6% 22.7%

9.1% 8.2% 8.5% 9.0%

Jul-11

Sep-11

Nov-11

Jan-12

Mar-12

The Research Team research@bimbsec.com.my 03-26918887 ext 169

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23 May 2012

Results Review: QL Resources 4QFY12

Quarterly figures
FYE 31 Mar (RMm) Revenue EBIT Pretax profit Taxation Minority Interest Net Profit EPS (sen) Net gearing (x) EBIT margin (%) PBT margin (%) Net profit margin (%) Effective tax rate (%) 4QFY11 502.6 42.3 40.5 (7.0) (1.8) 31.6 3.8 0.61 8.4% 8.0% 6.3% 17.3% 1QFY12 454.6 39.9 36.2 (6.3) (2.1) 27.8 3.3 0.61 8.8% 8.0% 6.1% 17.5% 2QFY12 495.2 50.4 47.8 (9.2) (0.5) 38.0 4.6 0.65 10.2% 9.6% 7.7% 19.4% 3QFY12 499.0 49.8 46.4 (9.5) (2.5) 34.4 4.1 0.67 10.0% 9.3% 6.9% 20.5% 4QFY12 498.2 50.1 42.5 (8.3) (2.3) 31.9 3.8 0.61 10.1% 8.5% 6.4% 19.5% QoQ Chg -0.2% 0.6% -8.5% -12.8% -7.3% -7.4% -7.4% -8.8% 0.7% -8.3% -7.2% -4.7% YoYChg -0.9% 18.5% 5.0% 18.7% 25.8% 0.7% 0.7% 0.4% 19.5% 5.9% 1.6% 13.0% YTD'11 1776.8 174.6 160.8 (27.0) (9.2) 124.6 15.0 0.51 9.8% 9.1% 7.0% 16.8% YTD'12 1,946.9 190.3 172.8 (33.4) (7.4) 132.1 15.9 0.61 9.8% 8.9% 6.8% 19.3% YTD Chg 9.6% 9.0% 7.5% 23.6% -20.4% 6.0% 6.0% 19.7% -0.6% -1.9% -3.2% 15.0%

Source: BIMB Securities

Income Statement
FYE 31 Mar (RMm) Revenue EBITDA Pretax profit Tax MI Net profit CY Net profit EPS (sen) EPS growth (%) CY EPS (sen) DPS (sen) NTA/ share (RM) Net gearing (x) PER (x) Div. yield (%) P/ NTA (x) EV/ EBITDA (x) ROE (%) 2010 1,476.4 188.0 136.2 (21.5) (8.2) 106.4 120.0 12.8 19.2% 14.4 3.6 0.60 0.61 24.7 1.1% 5.3 15.7 23.1% 2011 1,776.8 220.0 160.8 (27.0) (9.2) 124.6 130.2 15.0 17.0% 15.7 4.3 0.87 0.51 21.1 1.3% 3.6 13.9 20.1% 2012 1,946.9 249.8 172.8 (33.4) (7.4) 132.1 154.6 15.9 6.0% 18.6 4.5 0.84 0.61 19.9 1.4% 3.8 12.8 17.1% 2013E 2014E 2,269.2 2,476.4 296.0 325.8 212.0 230.1 (40.3) (43.7) (9.6) (9.6) 162.1 176.7 173.1 196.4 19.5 21.2 22.7% 9.0% 20.8 23.6 5.5 6.0 0.98 1.13 0.59 0.53 16.2 14.9 1.7% 1.9% 3.2 2.8 11.0 8.1 18.6% 17.8% Source: BIMB Securities

Balance Sheet
FYE 31 Mar (RMm) Non Current Assets Current Assets Total Assets Current Liabilities Non Current Liabilities Shareholders' Fund Minority Interests Equity & Liabilities 2010 654.0 452.1 1,106.1 292.5 255.0 502.8 55.8 1,106.1 2011 887.5 584.9 1,472.4 398.9 274.1 735.9 63.4 1,472.4 2012 1112.7 556.5 1,669.1 429.0 359.9 811.6 68.6 1,669.1 2013E 1197.4 576.2 1,773.5 417.1 359.9 927.9 68.6 1,773.5 2014E 1320.4 591.3 1,911.6 428.4 359.9 1054.8 68.6 1,911.6

Source: BIMB Securities

www.bimbsec.com.my

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23 May 2012
DEFINITION OF RATINGS BIMB Securities uses the following rating system:

Results Review: QL Resources 4QFY12

STOCK RECOMMENDATION BUY Total return (price appreciation plus dividend yield) is expected to exceed 10% in the next 12 months. TRADING BUY Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain. NEUTRAL Share price may fall within the range of +/- 10% over the next 12 months TAKE PROFIT Target price has been attained. Fundamentals remain intact. Look to accumulate at lower levels. TRADING SELL Share price may fall by more than 15% in the next 3 months. SELL Share price may fall by more than 10% over the next 12 months. NOT RATED Stock is not within regular research coverage. SECTOR RECOMMENDATION OVERWEIGHT The Industry as defined by the analysts coverage universe, is expected to outperform the relevant primary market index over the next 12 months NEUTRAL The Industry as defined by the analysts coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months UNDERWEIGHT The Industry as defined by the analysts coverage universe, is expected to underperform the relevant primary market index over the next 12 months Applicability of ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies. Disclaimer The investments discussed or recommended in this report not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of BIMB Securities Sdn Bhd may from time to time have a position in or either the securities mentioned herein. Members of the BIMB Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgements as of this and are subject to change without notice. BIMB Securities Sdn Bhd accepts no liability for any direct, indirect or consequential loss arising from use of this report.

Published by

BIMB SECURITIES SDN BHD (290163-X) A Participating Organisation of Bursa Malaysia Securities Berhad Level 32, Menara Multi Purpose, Capital Square, No. 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur Tel: 03-2691 8887, Fax: 03-2691 1262 http://www.bimbsec.com.my

Kenny Yee Head of Research

www.bimbsec.com.my

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