QL Resources’ upward trend in its share price points to more upside

QL Resources Bhd saw some upward movements, breaking new 52-week high of RM6.88 recently. The counter closed at RM6.78 on Sept 13, rising some 24.2% in the past year, having plunged to a 52-week low of RM5.34 lst November.

QL Resources, with a market cap of RM16.5 billion as at Sept 13, is currently trading at a price/earning ratio of 36.5x, which is the highest among peers. However, this PE ratio is the lowest compared to its historical valuation in recent years. The low PE ratio is partly caused by an increase in earnings in the trailing 12 months.

The company's price over net asset value (P/NAV) ratio of 5.4x is higher than most peers. Nevertheless, this P/NAV ratio is below the recent years’ average. Valuation expansion (compression) may be due to improved (lowered) expectations for future growth.

QL Resources is involved in poultry farming and feedstuff trading, manufacture of surimi and fishmeal processing for domestic and export markets. It is also involved in palm oil milling, plantations and biomass clean energy.

In terms of financial performance, QL Resources registered a 16% year-on-year increase in its net profit in the first quarter ended June 30, 2024 (1QFY25). The improved performance was mainly due to growth of its convenience store chain business.

Net profit for 1QFY25 was RM107.43 million compared with RM92.81 million a year ago, while revenue was flattish, growing marginally to RM1.62 billion from RM1.6 billion. QL Resource’s convenience store chain division, which runs FamilyMart stores in Malaysia, reported a 77% jump in pre-tax profit thanks to improved margins from higher store sales.

Revenue for the segment rose 22% mainly due to a net increase of 35 stores and 35 FM Mini outlets during the period as well as better average store sales. Meanwhile, profit before tax of its mainstay livestock farming business rose 8% mainly due to improved performance in Malaysia's layer operations, supported by lower feed costs and maintained egg cost subsidies.

Contributions from a newly acquired layer farm and better results from its Vietnam farming operations also boosted performance of the segment. Segment revenue slipped slightly due to lower unit prices for feed raw materials and reduced selling prices for eggs in Malaysia.

The marine product manufacturing segment's pre-tax profit increased slightly, benefiting from better margins for surimi-based products due to lower input material costs. Revenue for the segment however decreased marginally mainly due to lower sales in fishing, fishmeal, and aquaculture activities.

Essentially, QL Resources can be a good bet for investors looking to ride on the positive sentiments as the economy improves.