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3A (0012)  THREE-A RESOURCES BHD - Above Expectations

Three-A Resources (3A) net profit for 2QFY21 surged by 89.2% YoY to RM12.7m, attributable to the increase in quantities of products sold and higher average selling prices. Cumulative 1HFY21 net profit came in at RM26m, and was above our expectations, accounting for 78% of our full-year forecast. The discrepancy in our forecast was mainly due to the stronger-than-expected sales and better-than-expected operating margins. We are adjusting our FY21-23 earnings upwards by an average of 27% as we raise our sales and operating margins assumptions. Going forward, we continue to favour 3A as we are expecting a gradual reopening in the economy which should bode well for 3A as it translates into higher demand for F&B products. Our Outperform call on 3A is retained, with a higher TP of RM1.35 (from RM1.06) based on a 15x FY22F EPS.

    2QFY21 revenue grew by 22.7% YoY to RM131.2m mainly due to the increase in sales volume and higher average selling prices. Sales in Malaysia increased by 38% YoY, likely attributable to the low base effect whilst being supported by the higher average selling price.

    2QFY21 pretax profit (PBT) jumped by 77.2% YoY to RM17.1m, as PBT margin grew by 4% to 13%. We mainly attribute the stronger performance to the better economies of scale from the higher sales volume and the higher selling prices which enables the group to pass on the increase in raw material cost. Note that sugar prices have increased by c.24% YTD (Figure 2).

    Future outlook. Going forward, the group plans to mitigate the cost pressure by continuing with its automation plans to improve production plant efficiency and achieve savings in operational and manpower cost. In addition, 3A remains committed to invest in R&D initiatives to expand its product range to meet the constantly evolving customers’ requirements.

Source: PublicInvest Research - 27 Aug 2021


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