Analysts positive on Power Root’s medium-term outlook as the group implements repackaging, new variants

KUCHING: Analysts are feeling positive on on Power Root Bhd’s (Power Root) medium-term outlook, following a meeting with the management at which the group appear poised to benefit from higher profitability domestically, albeit on lower sales.

According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research), while Power Root is trimming marketing spend, the group will continue to implement selective strategies to gain traction on its key products, such as product repackaging and introducing new variants, which could bolster local demand.

“However, with the implementation of the Sales and Service Tax (SST), management described that it would be passing down the new tax burden to consumers, which may undermine the group’s sales momentum.

“The indicative taxes are five per cent for coffee and 10 per cent for energy drinks,” Kenanga Research said.

The research arm has nonetheless noted that results could be supported by better margins regained from comparatively lighter production costs as compared to financial year 2018 (FY18) on the back of better hedged positions and overall easing commodity trends. It further recalled that the group is in the midst of implementing further structural improvements to optimise operating expenses and minimising wastages.

“Post- visit, we remain reassured by the group’s medium-term prospects as poorer top-line could be compensated by a significantly more profitable environment.” — Bernama