Leong Hup’s shares fall after profit warning

by SHAZNI ONG/ pic credit: www.leonghupinternational.com

LEONG Hup International Bhd (LHI) dropped almost 6% or five sen to 80 sen yesterday after the livestock and poultry company issued a profit guidance warning of “significantly lower profits after taxation for the second quarter ended June 30, 2019 (2Q19)”.

Rakuten Trade Sdn Bhd research VP Vincent Lau, when contacted by The Malaysian Reserve, said the warning on lower profit forecast triggered the share price weakness.

“However, it did recover from an intraday low of 77.5 sen to close at 80 sen. With the improved price of broiler and day-old chicks (DOC), results should be better in 3Q19,” he said yesterday.

LHI is well below its initial public offering price of RM1.10.

LHI — which is Asean’s largest fully integrated producer of poultry, eggs and livestock feed — said it expects the group to record significantly lower profits after taxation for the 2Q19 due to a significant decline in the average selling prices (ASP) in most of the products sold by the group, particularly in Malaysia, despite higher volume sales.

Its ED and group CEO Tan Sri Francis Lau in a statement said its sales volume is still growing well despite the lower ASP in 2Q19.

“Wide price fluctuation is inherent in our industry, particularly in Malaysia. Given that the group’s operating costs are relatively stable, the weaker ASP in 2Q19 will affect the group’s margins and profitability. However, as at Aug 5, 2019, the market prices of broiler DOC and broiler chickens were RM2 per DOC and RM5 per kg respectively,” he said.

LHI saw a growth in overall sales volumes across key product categories despite reporting lower ASP in 2Q19, including in livestock feed, 13.9% year-on-year; broiler DOC, 8.1%; and broiler chickens, 10.7%. In addition, the total number of eggs sold increased in 2Q19 by 5.9% compared to 2Q18.

Despite the volume growth, the group’s profits were affected as a result of the significant decrease in the ASP. However, Lau expects its sales volume growth to continue across key product categories and in most of the markets that it sells to.

LHI is the second company to issue a profit warning in the span of about a week and came just three months after LHI was relisted on Bursa Malaysia’s Main Market.

On Aug 6, PRG Holdings Bhd’s 54.19%-owned subsidiary, Furniweb Holdings Ltd, issued a profit warning to its shareholders and potential investors that it expects to record a RM4.2 million net loss for the six months ended June 30, 2019, compared to the net profit of RM600,000 in the same period a year earlier.

The loss was due to an increase in marketing and distribution costs as the retail business of the group commenced operation in 2Q19.

It also attributed the loss to an increase in administrative expenses due to professional fees incurred for the acquisition of Meinaide Holdings Group Ltd, which was completed on June 28, 2019, as well as pre-operating and administrative expenses incurred during the period for the retail business of the group.

The profit warning was based on the preliminary review of the unaudited consolidated management accounts of the group for the six months ended June 30, 2019. Furniweb is listed on the Growth Enterprise Market on the Hong Kong Stock Exchange.

Separately, TH Plantations Bhd dipped 2.13% or one sen to 46 sen after it suspended its CFO based on findings from a forensic audit done recently.

TH Plantations, which has a market capitalisation of RM406.57 million and is 73.8%-held by Lembaga Tabung Haji, suspended its CFO Mohamed Azman Shah Ishak effective Aug 9 until further notice.

Mohamed Azman Shah has been served with a show-cause letter and is required to provide a written reply within 14 days. However, the group has yet to reveal the findings of the forensic audit.

In the interim, TH Plantations said its assistant GM for finance Marliyana Omar, and senior finance manager Hamidah Hassan will take over the responsibilities and functions of the CFO.