Kawan Food set to benefit from frozen food demand

PETALING JAYA: Kawan Food Bhd is expected to continue to benefit from higher demand for frozen foods as it pushes further to drive better cost efficiencies.

It will leverage on higher export sales to drive growth. That will be via efforts to grow its market presence in more countries. This will be done by participating in more food exhibitions.

It is also looking to finalise several new distributors in new and existing export markets, said CSGCIMB Research Bhd in a report.

Kawan was also focusing on widening its product offerings with new product introductions in the healthy foods segment via more variants and new innovative products targeting the young consumers, the report said. Kawan, the manufacturer of frozen Asian food delicacies, is seeing higher demand for frozen food, leading to an increase in both its export (which makes up 57.3% of FY19 sales), as well as domestic sales (42.7% of FY19 sales).

The lockdown has helped the company boost sales in its key export markets. CSGCIMB estimates a rise in sales from key retailers of about 20% to 25% since the mandatory control order (MCO) versus pre-mco period.

Kawan also recorded higher e-commerce sales. Year to date sales have more than doubled year-on-year even though this is minimal revenue contribution currently of below 1% of FY19 revenue.

The house maintained an “add’’ to the stock with a rise in its target price to RM2.40 and this is based on stronger than expected exports and better economics of scale. The stock closed 18 sen or by 10.29% higher to RM1.93 yesterday. At this level, its market cap stood at Rm694mil.