Better years ahead for QL Resources with new plants and FamilyMart outlets

KUCHING: Public Investment Bank Bhd (PublicInvest Research) remains optimistic on QL Resources Bhd’s ( QL) future, citing its efforts to enhance its marine product manufacturing (MPM), palm oil and convenience store segements as key drivers.

As its main segment, QL’s MPM division contributes 27.7 and 48.6 per cents of the group’s FY18 revenue and profit before tax respectively, while its Hutan Melintang plants contribute more than 30 per cent to MPM division’s revenue.

The Hutan Melintang plant makes up about 35 per cent of QL’s overall MPM segment capacity. The other MPM plants are at Endau (Johor), Johor Bahru (Johor), Tuaran (Sabah), Kudat (Sabah) and Surabaya ( Indonesia).

“Incorporated in 1994, QL Foods Sdn Bhd operates seven HACCP and halal certified plants in Hutang Melintang, which comprises of three blocks of frozen products plants, one block of chilled products plant, one block of surimi plant and two blocks of snacks plants,” it detailled.

“Other than that, it also has biomass plant and water treatment plant. There are approximately 1,200 employees working at QL’s HutanMelintangplants,withabout 40 per cent are foreign workers. Major exports destinations are Japan, Korea, Canada and the US.”

To note, frozen surimi-based products account for about 50 per cent of QL Foods Sdn Bhd revenue, with 30 per cent for export and 70 per cent for local. QL is the biggest frozen surimi player in Malaysia, producing 100 metric tonnes (mt) per day.

Besides that, QL also produce chilled surimi-based products, of which mostly are fishball and fishcake. Surimi-based products in chilled condition can last for 12 days while frozen surimi-based products can be stored for 1.5 years.

QL recently expanded its surimibased production capacity at Hutan Melintang MPM unit by about 27,500mt per year. The works for its new chilled and frozen surimi-based products plants with 12,500mt per year and 15,000mt per year capacity were completed in March 2018.

It is currently ramping up production for these two new plants which is expected to contribute to FY19F earnings. With the new plants, the total capacity of Hutan Melintang plants has increased to 60,000mt per year.

PublicInvest Research saw that QL’s operations are also being increasingly automated and continuously upgraded to improve operational efficiency.

“Coupled with the ramping up of new capacity, we are expecting an improved set of results for its MPM segment,” it said. “In addition, the group also plans to invest in new frozen surimi-based products plant in Surabaya in FY19F and to increase aquaculture production capacity from present 1,500mt per year to 5,000mt per year in the next five years.”

Going forward, the group will mainly focus on exports due to better margins and potential new markets.

The group expects a moderately bearish outlook for its palm oil POA segment, mainly due to the lower CPO prices and labour shortage in Tawau, Sabah.

In addition, the adoption of the new accounting standards MFRS 141 (Agriculture: Bearer Plants) which require depreciation on bearer plants is expected to have a slight negative impact on the segment’s bottom-line.

This segment’s medium to long term growth will be supported by the growing palm maturity from its Indonesia plantation.

Meanwhile on its convenience store operations, PublicINvest Research saw that QL aims to open additional 50 stores in FY19F, bringing its total number of stores to 89.

On the latest count, it has 64 FamilyMart stores across the Klang Valley, achieving 50 per cent of its FY19F store- opening target.

“While the convenience store operations are currently still in the gestation phase, the actual performance in terms of key store operating KPIs such as gross margin, average ticket count and ticket size are meeting expectations,” it concluded.