Written by Yong Min Wei
Monday, 12 July 2010 10:57
PETALING JAYA: Three-A Resources Bhd (3A), a food and beverage (F&B) ingredient manufacturer, expects to register a “strong double-digit” revenue growth in its financial year ending Dec 31, 2011 (FY11) riding on major expansion of its plants in Sungai Buloh, said its director Fong Chu King.
He said the group’s third glucose plant, which would be ready by the fourth quarter of this year, would add a maximum of 8,000 tonnes per month of glucose production to supplement its first and second lines of output of 6,000 tonnes and 7,000 tonnes, respectively.
Fong said 3A was also on track to set up its second maltodextrin plant in the fourth quarter which could churn out some 2,000 tonnes per month of the powder product which is used as a bulking agent as well as a processing aid and texture improver in a variety of F&B products.
“The first maltodextrin plant is already in full capacity and it is reflected in our revenue growth,” he told The Edge Financial Daily recently.
In the first quarter ended March 31, 2010, the group’s revenue rose 85% to RM61.33 million from RM33.07 million a year earlier, while net profit jumped 178% to RM5.95 million from RM2.14 million. Basic earnings per share (EPS) rose to 1.61 sen from 0.69 sen. As at March 31, 2010, the group’s net asset per share stood at 38.47 sen.
According to Fong, 3A has invested between RM7 and RM8 million in its third glucose plant and about RM16 million in its second maltodextrin plant, adding that the group wanted to ensure consistent supply of products and on-time deliveries.
“We are still enjoying strong growth in 2010 from the utilisation of our second glucose plant since 2008 and successful upgrading of some plants to push output,” said Fong, adding that glucose could be applied to a variety of products such as confectionery, non-dairy creamer and sauces.
In the year ended Dec 31, 2009, the group posted a net profit of RM18.03 million, up 49% from RM12.13 million in the previous year while revenue climbed 17% to RM178.58 million. FY09 EPS stood at 5.7 sen. In FY09, 3A declared an 8% interim dividend less tax of 20 sen per share which was paid on Jan 9, 2010.
Fong pointed out that 3A was confident of posting satisfactory results with strong growth in the next few years as it was actively looking to expand its export markets in the Asia Pacific and penetrate new markets in the European Union.
“About 30%-35% of our revenue is derived from the export market. Our export figures are growing each month and so is our export market,” he said.
On whether 3A was looking at a dividend policy for shareholders, Fong said: “3A is still growing and we prefer to retain some of these profits for the purpose of generating growth.”
The stock rose seven sen to RM1.90 last Friday. The counter traded to a 52-week high of RM2.36 on Feb 17, 2010 and a low of 38.5 sen on July 9, 2009. Year to date, it is up 25.83%.
This article appeared in The Edge Financial Daily, July 12, 2010.
Showing posts with label 3A. Show all posts
Showing posts with label 3A. Show all posts
Sunday, July 11, 2010
Tuesday, October 20, 2009
3A: More details needed on potential JV
Written by InsiderAsia
Tuesday, 20 October 2009 16:12
FOOD ingredient products manufacturer, Three-A Resources (3A, RM1.58) has hogged more than its fair share of the limelight over the past few weeks. Its share price has risen by more than five-fold in the year to date, most of its gains coming in the past month, on the back of high trading volumes.
The primarily catalyst was news that Singapore-listed Wilmar International Ltd will invest in the company via a private placement of 61.6 million shares. The shares were priced at 75 sen per share, which will raise RM46.2 million cash proceeds for 3A. Upon completion, Wilmar will hold a 16.67% equity stake in the company.
More importantly, the placement exercise is widely seen as the precursor to a closer business partnership in the future. 3A has suggested the possibility of the two companies setting up manufacturing facilities for food ingredient products in neighbouring countries, such as China.
Private placement a precursor to future JV?
Wilmar is one of the world's largest refiners and traders for crude palm oil. It is also a leading distributor of staple food, such as cooking oil, flour, rice and bottled mineral water, in China. Its extensive network, both upstream and downstream, is expected to work just as well for food ingredient products.
3A is already the leading ingredient products manufacturer in Malaysia. Its main products include caramel colour, glucose and maltose syrup as well as owning our country's only maltodextrin plant. Business has been growing at a rapid pace. The company's sales expanded at a compounded rate of 30% per annum between 2003-2008. Plans for the next few years will further underpin growth, forecast to be in the double-digit range annually.
Success in the overseas markets is another acknowledgement of the company's product quality. Its ingredient products are sold to countries such as Korea, Taiwan, Singapore, Australia and the Philippines. Exports currently account for about one-third of the company's sales. In short, 3A has established a good reputation and track record after being in the business for more than three decades. Partnership with Wilmar will help 3A penetrate the world's most populous market more effectively and significantly expand its business operations beyond the local shore.
Devil is in the details
Nonetheless, discussions on any overseas joint ventures are believed to be in very preliminary stages. It is certainly too early to quantify future earnings stream. While Wilmar will undoubtedly give 3A a leg up in the Chinese market, we expect it will take time to convince manufacturers of end consumer products — such as soya sauce, confectionery and dairy products manufacturers — to switch from their existing supply source. Customers will require assurances on consistency of quality, production and delivery. For instance, new plants often encounter teething problems.
In other words, the process is not as simple as getting products on the shelves. In this sense, the steep rise in 3A's share price may have been a little premature.
Good longer-term growth prospects
To be sure, 3A's earnings are set to expand going forward. Its new 7,000-tonne per month glucose plant, completed in the fourth quarter of 2008 (4Q08), is registering rising utilisation. The 1,200-tonne per month maltodextrin plant is almost running at full capacity, thanks to the availability of glucose feedstock.
It is planning for a second maltodextrin plant with up to 2,000 tonnes per month capacity. If all goes to plan, the new plant will be operational by 4Q2010. Additional feedstock requirement for the new maltodextrin plant was already taken into account when 3A was building its glucose plant last year. The glucose plant can easily be upgraded to produce up to 12,000 tonnes per month with the incurrence of just a small additional capex.
3A's net profit is forecast to grow by 34% to RM16.2 million this year and a further 25% to RM20.2 million in 2010. That translates into earnings per share of 4.4 sen and 5.5 sen for 2009-2010 (after adjusting for the additional shares issued).
But valuations-rich pending further information
However, following the strong price rally, the stock is now trading at a relatively rich price-to-earnings (P/E) of 36 times and 28.9 times our estimated earnings for the two years.
Our forecast has not taken into account earnings from any future partnership ventures with Wilmar, which may or may not materialise. Hence, pending more concrete details, we are inclined to downgrade our recommendation from buy to hold, at least for now.
Tuesday, 20 October 2009 16:12
FOOD ingredient products manufacturer, Three-A Resources (3A, RM1.58) has hogged more than its fair share of the limelight over the past few weeks. Its share price has risen by more than five-fold in the year to date, most of its gains coming in the past month, on the back of high trading volumes.
The primarily catalyst was news that Singapore-listed Wilmar International Ltd will invest in the company via a private placement of 61.6 million shares. The shares were priced at 75 sen per share, which will raise RM46.2 million cash proceeds for 3A. Upon completion, Wilmar will hold a 16.67% equity stake in the company.
More importantly, the placement exercise is widely seen as the precursor to a closer business partnership in the future. 3A has suggested the possibility of the two companies setting up manufacturing facilities for food ingredient products in neighbouring countries, such as China.
Private placement a precursor to future JV?
Wilmar is one of the world's largest refiners and traders for crude palm oil. It is also a leading distributor of staple food, such as cooking oil, flour, rice and bottled mineral water, in China. Its extensive network, both upstream and downstream, is expected to work just as well for food ingredient products.
3A is already the leading ingredient products manufacturer in Malaysia. Its main products include caramel colour, glucose and maltose syrup as well as owning our country's only maltodextrin plant. Business has been growing at a rapid pace. The company's sales expanded at a compounded rate of 30% per annum between 2003-2008. Plans for the next few years will further underpin growth, forecast to be in the double-digit range annually.
Success in the overseas markets is another acknowledgement of the company's product quality. Its ingredient products are sold to countries such as Korea, Taiwan, Singapore, Australia and the Philippines. Exports currently account for about one-third of the company's sales. In short, 3A has established a good reputation and track record after being in the business for more than three decades. Partnership with Wilmar will help 3A penetrate the world's most populous market more effectively and significantly expand its business operations beyond the local shore.
Devil is in the details
Nonetheless, discussions on any overseas joint ventures are believed to be in very preliminary stages. It is certainly too early to quantify future earnings stream. While Wilmar will undoubtedly give 3A a leg up in the Chinese market, we expect it will take time to convince manufacturers of end consumer products — such as soya sauce, confectionery and dairy products manufacturers — to switch from their existing supply source. Customers will require assurances on consistency of quality, production and delivery. For instance, new plants often encounter teething problems.
In other words, the process is not as simple as getting products on the shelves. In this sense, the steep rise in 3A's share price may have been a little premature.
Good longer-term growth prospects
To be sure, 3A's earnings are set to expand going forward. Its new 7,000-tonne per month glucose plant, completed in the fourth quarter of 2008 (4Q08), is registering rising utilisation. The 1,200-tonne per month maltodextrin plant is almost running at full capacity, thanks to the availability of glucose feedstock.
It is planning for a second maltodextrin plant with up to 2,000 tonnes per month capacity. If all goes to plan, the new plant will be operational by 4Q2010. Additional feedstock requirement for the new maltodextrin plant was already taken into account when 3A was building its glucose plant last year. The glucose plant can easily be upgraded to produce up to 12,000 tonnes per month with the incurrence of just a small additional capex.
3A's net profit is forecast to grow by 34% to RM16.2 million this year and a further 25% to RM20.2 million in 2010. That translates into earnings per share of 4.4 sen and 5.5 sen for 2009-2010 (after adjusting for the additional shares issued).
But valuations-rich pending further information
However, following the strong price rally, the stock is now trading at a relatively rich price-to-earnings (P/E) of 36 times and 28.9 times our estimated earnings for the two years.
Our forecast has not taken into account earnings from any future partnership ventures with Wilmar, which may or may not materialise. Hence, pending more concrete details, we are inclined to downgrade our recommendation from buy to hold, at least for now.
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