HLIB ex­pects strong fi­nan­cial per­for­mance from Lay Hong

The Star Malaysia - StarBiz - - News - By GANESHWARAN KANA ganeshwaran@thes­tar.com.my

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.

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