HLIB expects strong financial performance from Lay Hong
PETALING JAYA: Integrated livestock farming player Lay Hong Bhd is expected to post a strong financial performance moving forward as it continues to expand its capacity in the upstream segment, according to Hong Leong Investment Bank (HLIB) Research.
The research house said that Lay Hong’s earnings could grow by compounded annual growth rate of 47% from the financial years of 2017 to 2020 (FY17-20). This is on the back of capacity expansion in its layer and broiler segments.
The bulk of the output from upstream segments will be processed into valued-added products, which enjoy better profitability and less volatile selling prices vis-à-vis generic poultry products.
“The company’s upstream capacity expansion will be catered for the growing demand for downstream food products such as pasteurised liquid egg, functional eggs and processed chicken products, among others.
“This will be reinforced by its tie-up with Japan-based NH Foods to penetrate into the growing halal food demand in the Middle East, Indonesia, Singapore, as well as catering for Olympics 2020 in Tokyo, by leveraging on NH Foods’ extensive research and development and marketing expertise in the regional markets,” said the research unit in a note.
Recall, Lay Hong established a joint-venture with NH Foods back in March 2016, as part of its move to expand its presence in the frozen processed food product segment, in both local and international markets.
Lay Hong owns an equity interest of 49% in the joint-venture, NHF Manufacturing (M) Sdn Bhd. NH Foods owns the remaining 51% stake.
To note, NH Foods is the largest food producer in Japan by sales value.
On the company’s share price movement, HLIB Research said that Lay Hong’s share price was bottoming up.
“Boosted by the Government’s commitment in raising disposable income in the Budget 2018, Lay Hong’s share price inched up by 1% to RM1.02 last Friday, accompanied by a 74% surge in trading volume,” it said.
HLIB Research issued a “buy” call on Lay Hong’s shares, with a target price of RM1.24.
As of close of trading yesterday, the counter closed 1% lower at RM1.01. A total of 845,900 shares changed hands.