HLIB Research expects QL Resources’ biggest segments, namely, marine products manufacturing and integrated livestock farming divisions, to continue charting better growth.
PETALING JAYA: QL Resources Bhd
’s plan to build a new surimi-based production plant in Hutan Melintang, Perak, is expected to be a growth catalyst for the group’s marine products manufacturing division.
The proposed plant is expected to be built at the food manufacturer’s 200-acre plot of land next to its existing plant.
According to Hong Leong Investment Bank (HLIB) Research, the capital expenditure (capex) budgeted for the project is RM500mil
“At this juncture, the application for a separate land title has been approved and is now pending final Economic Planning Unit approval.
“The construction of a workers’ quarters is expected to be completed by September 2023 for certificate of completion and compliance application,” the brokerage said.
“Furthermore, QL Resources is expanding its footing with a new frozen surimi-based product factory in Surabaya, Indonesia,” it wrote in its report following a visit to QL Resources’ subsidiary, QL Foods Sdn Bhd, in Hutan Melintang.HLIB Research noted the construction of the plant was progressing well with the target commissioned date set at the fourth quarter of its financial year ending March 31, 2024 (4Q24).
It maintained a “buy” call on QL Resources, with an unchanged target price of RM6.96 based on an unchanged 45 times forward earnings.
“We expect QL Resources’ biggest segments, namely, marine products manufacturing and integrated livestock farming divisions to continue charting better growth,” HLIB Research said.
“Its rich valuation is justified by its status as a key consumer staple,” it added.
According to HLIB Research, QL Resources will benefit from stable demand and prices of surimi and surimi-based products.
Despite higher operating expenditure (opex) in its marine product manufacturing division, the company would likely see positive growth in its bottom line.
Citing QL Resources’ management, HLIB Research said to date, fish landing in this new fishing season was better than the preceding year’s season.
“This is positive to ensure the adequate supply of fresh marine life for the production of surimi,” the brokerage said.
“We gather that the demand and price for surimi has been stable despite the uptick in opex with an increase in labour costs from the reduction in weekly working hours from the Employment Act implementation,” it added.
Overall, the outlook for QL Resources’ marine products manufacturing division remained positive for the near term, HLIB Research said.
“QL Foods is the biggest manufacturer and distributor of surimi and surimi-based products in Asean.
“With the largest fishing base in the country, QL Foods is the first vertically integrated surimi manufacturer with automated downstream production line which enables it to simultaneously produce surimi both in chilled and frozen forms,” the brokerage said.
It noted another unit, QL Fishmeal Sdn Bhd, would provide further synergy by processing the smaller fish and the unwanted pieces such as fish heads, guts, and bones to manufacture fishmeal – a high pepsin digestibility grade.
