Technical | Fundamental Analysis Discussion Stocks Listed In Bursa

Monday, March 9, 2015

TeoSeng ... Highest Profit Margins Among Peers.


An integrated chicken egg player is producing a three million eggs a day which is among the largest in Malaysia, and has set an ambitious growth target. It aims to spend RM200mil to grow its capacity by 67% to five million eggs a day in the next four to five years from March 2015.
 
Teo Seng, joinly controlled by the Lau family of Leong Hup and the family of managing director Nam Yok San, has been reporting healthy numbers.

It is one of the few poultry players not to have suffered a full-year loss since its listing in 2008. It also enjoys among the highest profit margins in the industry. It achieved a 12.8% net profit margin for the financial year ended Dec 31, 2014, among the highest of all poultry players for that year.

As an integrated player, Teo Seng has its own in-house feedmill to cater to its needs.

It also has a geographical advantage because its farms in Johor are close to Singapore where most of the exports go to.

The company exports 25% to 30% of its production.

While some 90% of its income is derived from selling eggs, it also produces egg trays and animal health products.

It also has low debt levels, with a gearing ratio of a mere 0.5 times, compared with many competitors with high debt levels. Teo Seng’s low gearing, coupled with its free cash flows enable the company to easily fund its expansion plans. Teo Seng has a cash balance of close to RM40mil as of Dec 31, 2014.

Teo Seng has a dividend policy of paying out between 25% and 30% of profits.

Late 2014, Teo Seng embarked on another rewarding exercise for shareholders – giving free bonus shares and warrants.

For FY2014, Teo Seng enjoyed a year-on-year 107% jump in its earnings to RM48.62mil from RM23.42mil.

The company presently (06 March 2015) trades at an undemanding historical price earnings ratio of 10 times.

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