Analysts reassured with Power Root’s medium-term outlook

KUCHING: Following a meeting with Power Root Bhd’s (Power Root) management, the research arm of Kenanga Investment Bank Bhd (Kenanga Research) analysts came away feeling reassured on the group’s medium-term outlook.

Kenanga Research was reassured with Power Root’s strategies which continue to demonstrate sales growth and to expand market share.

“While the local scene may still appear uninspiring from poor sentiment, the group could benefit more by focusing on expanding its export sales given the significantly vast opportunities for newer and more vibrant consumer base,” the research arm said.

Although hiccups could persist in financial year 2018 (FY18) due to higher commodity prices, Kenanga Research believed the group’s medium-term outlook in FY19 is relatively intact.

Hence, the research arm cut its earnings assumptions for FY18 by 4.2 per cent to incorporate the higher average production costs expected for the year but leave FY19E numbers relatively unchanged on lower commodity prices translating into healthier margins.

Despite trimming FY18E earnings, Kenanga Research believed the stock could be well positioned to benefit from a turnaround in consumer spending as Power Root is still capable of registering growth on ‘pessimistic’ sentiment levels.

“The stock still commands a strong potential dividend yield of 5.9 per cent-6.3 per cent in FY18EFY19E as we leave our dividend estimates unchanged,” it said.

Kenanga Research thus maintained ‘outperform’ on Power Root and target price of RM2.70 per share.